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Corporate Bond Sales Surge to Highest in Ten Months in Europe

Companies sold the most debt in Europe this month since January as borrowing costs approached a five-month low.

AT&T Inc. (T), the largest U.S. phone company, was among borrowers issuing 87 billion euros ($118 billion) of bonds, up from 72 billion euros in October, according to data compiled by Bloomberg. The average yield investors demand to hold corporate bonds in euros fell to 2 percent, 1 basis point from a June 6 low, Bank of America Merrill Lynch index data show.

Companies are making the most of cheap borrowing costs as central banks maintain stimulus to support an economic recovery. The European Central Bank cut its benchmark rate to a record low of 0.25 percent this month, while in the U.S., incoming Federal Reserve chairman Janet Yellen, who will replace Ben S. Bernanke early next year, said the benefits of monetary easing still outweigh the costs.

“Issuers have been keen to catch the market while sentiment is still good,” said Harpreet Parhar, a credit strategist at Credit Agricole SA in London. “The ECB rate cut and the confirmation of Yellen, expected to be at least as dovish as Bernanke, have helped keep borrowing costs low. It makes sense for companies to issue now.”

The cost of insuring corporate bonds against losses fell for a third month, with the Markit iTraxx Europe Index of credit-default swaps on 125 companies dropping to a 3 1/2-year low of 76 basis points on Nov. 27. The gauge climbed to 77 basis points at 11:13 a.m. in London.

The Markit iTraxx Crossover index of contracts on 50 junk-rated European companies fell 29 basis points this month to a six-year low of 313 basis points yesterday. The average yield on speculative-grade bonds sank to a record low of 4.94 percent, Bank of America Merrill Lynch index data show.

Non-financial companies including Edcon Holdings (Pty) Ltd., South Africa’s largest clothing retailer, and Italian online gaming company Snai SpA (SNA) sold 5.9 billion euros of junk-rated bonds in Europe this month, extending this year’s record issuance to 67 billion euros, according to data compiled by Bloomberg.

To contact the reporter on this story: Katie Linsell in Madrid at klinsell@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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