General Electric Co. and Ford Motor Co. lead $27.6 billion of corporate bond sales in the U.S. this week as the pace of offerings slows from a year ago with European issuers on the sidelines.
GE Capital Corp., the finance arm of the world’s largest maker of jet engines, sold $4 billion of notes and Dearborn, Michigan-based Ford Motor Credit Co. added $1 billion to a pair of offerings from last year, according to data compiled by Bloomberg. Sales this week are 43 percent below the $48.7 billion issued during the similar period a year ago.
Issuance of investment-grade company securities may fall to $60 billion to $70 billion this month, or as little as 44 percent of the five-year January average, as Europe’s fiscal crisis reduces investor appetite for debt from the region’s lenders, according to Bank of America Corp. BNP Paribas SA and Frankfurt-based Deutsche Bank AG were among European banks selling $16.4 billion of debt in the first week of 2011, Bloomberg data show.
“The biggest difference is the significant escalation of the European crisis, complemented by a decline in expectations for growth,” Adrian Miller, fixed-income strategist at Miller Tabak Roberts Securities LLC, said in a telephone interview. “The European banks’ issues and the lack of issuance from them dovetail into those two issues.”
GE Capital, based in Stamford, Connecticut, issued $2 billion of three-year notes and $1 billion each of five- and 10-year debt, Bloomberg data show. Bank of Nova Scotia sold $2.75 billion of debt and Citigroup Inc. raised $2.5 billion as investment-grade issuers tapped the market for $24.1 billion.
Ford Motor Credit sold $300 million of notes maturing in January 2015 and $700 million of debentures due in May 2018 after issuing $1.25 billion of each maturity in separate sales last year, Bloomberg data show. AmeriGas Partners LP, the largest retail propane distributor, sold $1.55 billion of eight-and 10-year notes.
Bank of Montreal sold $1.5 billion of five-year, 2.5 percent notes and Icahn Enterprises LP issued $500 million of 8 percent, six-year debt as offerings today reached $3.15 billion, Bloomberg data show.
The extra yield investors demand to own U.S. corporate bonds instead of Treasuries has climbed 98 basis points, or 0.98 percentage point, to 341 basis points from a year ago, according to Bank of America Merrill Lynch index data. Spreads on bonds issued in the U.S. by euro-area lenders have expanded 229 basis points over that span, compared with 171 basis points of widening for all bank bonds, the data show.
Corporate Bond Yields
Absolute yields on U.S. corporate bonds fell to 4.81 percent, compared with 5.02 percent on Jan. 5, 2011, Bank of America Merrill Lynch index data show.
Kreditanstalt fuer Wiederaufbau, the German state-controlled development bank with AAA ratings from Moody’s Investors Service and Standard & Poor’s, was the only European lender to issue debt in the U.S. this week, Bloomberg data show. The bank sold $4.5 billion of 1 percent, three-year notes.
“We expect decent non-European, non-U.S. financial volumes -- in sharp contrast to the last two years that have seen very heavy volumes of financial supply to start the year,” Hans Mikkelsen, Bank of America’s investment-grade credit strategist, wrote in a Dec. 21 note to clients.