Corporate bond sales in the U.S. fell to $15.4 billion this week, the lowest level of 2012, as evidence mounted that a credit market rally was losing momentum.
Total SA, Europe’s third-largest oil producer, issued $2 billion of debt in its biggest offering since June 2010, according to data compiled by Bloomberg. Torrance, California-based Toyota Motor Credit Corp. got its lowest-ever bond coupon as it sold $1.25 billion of three-year notes, the data show.
Issuance fell 61 percent from last week’s $39.8 billion and the commercial paper market declined for the first time since the period ended Jan. 4 as European leaders wrangled over further assistance to Greece. Returns on company debt have fallen to 0.02 percent in February, after a gain of 4.42 percent in the preceding two months, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Master Index.
“We’ve definitely seen a slowdown,” Rob Crimmins, a New York-based money manager at RS Investments, which oversees $30 billion, said in a telephone interview. “Corporations have fortified their balance sheets so they don’t need to issue and with all the global economic uncertainty, they’re not sure if they should invest.”
Investment-grade corporate bond yields climbed this week to 3.55 percent, since reaching a record low of 3.45 percent on Aug. 4, Bank of America Merrill Lynch index data show. Yields on high-yield, high-risk bonds, rated below Baa3 by Moody’s Investors Service and less than BBB- by Standard & Poor’s, declined to 7.75 percent from 8.54 percent at the end of 2011, the index data show.
Sales this week compare with a 2012 average of $33.8 billion, Bloomberg data show.
Total, based in Paris, issued $1 billion of five-year, 1.5 percent bonds and the same amount of 10-year, 2.875 percent debt on Feb. 14, Bloomberg data show. The offering was its largest since it tapped the market for $2.5 billion on June 17, 2010. BP Plc and Royal Dutch Shell Plc are Europe’s two biggest oil producers.
Toyota Motor Credit issued 1 percent notes due February 2015 in its second U.S. offering of fixed-rate bonds this year on Feb. 14, Bloomberg data show. It issued $2 billion split between five-year, 2.05 percent debt and 10-year, 3.3 percent bonds on Jan. 9. Investment-grade borrowers issued a total of $12.2 billion of bonds, down 64 percent from the seven days through Feb. 10.
Chesapeake Energy Corp., the second-largest U.S. natural-gas producer after Exxon Mobil Corp., and Rite Aid Corp. were among junk-rated companies selling $3.1 billion of debt this week, a 49 percent decline from the previous period, Bloomberg data show.
Commercial Paper Falls
The seasonally adjusted amount of U.S. commercial paper outstanding fell by $10.8 billion to $962.1 billion in the week ended Feb. 15, the Federal Reserve said yesterday on its website. That was the first time the market has contracted since dropping $30.1 billion for the period ended Jan. 4, according to Fed data compiled by Bloomberg.
The pace of issuance slowed as European creditor countries tussled over how future aid is spent on Greece and the region’s finance ministers put off a decision on 130 billion euros ($171 billion) of assistance until at least Feb. 20. Concerns that an agreement might be delayed outweighed a Labor Department report that Americans filed 348,000 claims for jobless benefits last week, the fewest since 2008.
“The economic data here in the U.S. is still looking pretty positive,” Crimmins said. “We expect the U.S. to continue to grow, but the concern is with what’s going on in Europe.”