Corporate bond sales in the U.S. surged more than sixfold this week as yields hovered at about record lows.
Deere & Co., the largest maker of agricultural equipment, and WellPoint Inc. led borrowers selling $35.7 billion of debt, compared with $5.5 billion last week, according to data compiled by Bloomberg. Sales were the highest since $40.2 billion in the five days ended Aug. 10.
Issuance accelerated as borrowers seized a window of calm while the European Central Bank prepared to announce a plan for bond buying to bolster the region’s common currency and investors awaited today’s payrolls report in the U.S. for signals on whether the labor market is stagnating in the world’s largest economy. The Federal Reserve may signal at next week’s policy-setting meeting its willingness to undertake more quantitative easing to stimulate the economy.
“It makes for an opportune time,” Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview. “Considering the last few weeks have been dead, you expect companies will be itching to issue.”
Yields on bonds from the most creditworthy to the riskiest borrowers decreased to a record-low 3.84 percent on Sept. 3, before increasing to 3.88 percent, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Master index. The extra yield investors demand to own corporate bonds rather than government debentures decreased 5 basis points since Aug. 31 to 262 basis points, or 2.62 percent.
Sales of investment-grade debt reached $31.3 billion, the most since $51 billion was sold in the period ended March 9, Bloomberg data show. Sales increased from $5.5 billion last week and compare with a 2012 weekly average of $20 billion.
Yields increased from a record-low 2.98 percent on Aug. 31 to 3.04 percent, Bank of America Merrill Lynch index data show. Spreads decreased 3 basis points to 183 basis points.
WellPoint, the second-biggest U.S. health insurer, raised $3.25 billion in four-parts for its acquisition of Amerigroup Corp., Bloomberg data show. The offering included $1 billion each of 3.3 percent notes due January 2023 that yielded 175 basis points more than similar-maturity Treasuries and 4.65 percent bonds maturing in 2043 at a spread of 200 basis points.
The operator of Blue Cross and Blue Shield insurance plans, based in Indianapolis, also sold $625 million each of 1.25 percent, three-year notes at 95 basis points and 1.875 percent securities due January 2018 at 130 basis points, Bloomberg data show.
Sales of investment-grade debt in the U.S. are estimated to reach $750 billion this year, up from $700 billion, analysts led by Eric Beinstein at JPMorgan Chase & Co. wrote in a report today. JPMorgan has helped manage the most high-grade corporate bond sales in the U.S. this year with about $83.5 billion, excluding self-led transactions, Bloomberg data show.
“The new figure reflects that supply was running both ahead of expectations and ahead of the pace over the past few years,” according to the bank.
Yields on 10-year Treasuries increased eight basis points to 1.68 percent yesterday as the European Central Bank announced a bond-purchasing plan.
The ECB’s bond-buying program “will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro,” ECB President Mario Draghi said at a news conference yesterday in Frankfurt. “Under appropriate conditions, we will have a fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability in the euro area.”
The economy added 96,000 workers last month following a revised 141,000 rise in July that was smaller than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for a gain of 130,000.
Deere issued $1 billion of debt, selling $500 million each of 0.7 percent, three-year notes to yield 42 basis points more than similar-maturity Treasuries and 1.2 percent, five-year debt at a relative yield of 62 basis points, Bloomberg data show. The bonds are rated A2, the sixth level of investment grade, by Moody’s Investors Service.
Sales of high-yield bonds reached $4.4 billion and follow a shutdown in sales last week, Bloomberg data show. Issuance was the most since $11.4 billion in the five days ended Aug. 17 and compares with a 2012 weekly average of $5.7 billion.
Yields on junk debt decreased 7 basis points this week to 7.28 percent, Bank of America Merrill Lynch index data show. Spreads declined 18 basis points to 580 basis points.
Issuers planning sales include Nuveen Investments Inc., the asset manager owned by Madison Dearborn Partners LLC, with a $1.15 billion offering and Houston-based Midstates Petroleum Co. Inc. with a $550 million issue, Bloomberg data show.