JPMorgan Chase & Co. joined carmaker Daimler AG in selling bonds as corporate borrowing costs held near the lowest levels more than a year.
Corporate bond yields relative to the benchmark swap rate narrowed 119 basis points this year to 136 basis points as central banks take steps to bolster the economy, Bank of America Merrill Lynch index data show. JPMorgan’s seven-year senior unsecured notes, its first benchmark issue in euros since August, will be priced at a spread of 80 basis points.
“It’s an opportunistic piece of issuance while spreads are tight,” said Roger Francis, a credit analyst at Mizuho International in London. “I’m surprised more banks haven’t been doing this.”
Credit risk decreased today before President Barack Obama meets with a dozen corporate executives on tackling the U.S. budget deficit. European Union Economic and Monetary Affairs Commissioner Olli Rehn will make a statement on Spain this afternoon, his office said, after saying yesterday the country is “working hard” to meet its fiscal targets.
JPMorgan’s London-based peer Barclays Plc is marketing 10-year, dollar-denominated contingent capital bonds, while German carmaker Daimler is selling its sixth benchmark-sized euro-denominated offering this year, data compiled by Bloomberg show.
Credit-default swaps on JPMorgan fell two basis points to 104, Bloomberg data show. Contracts on Barclays rose for a sixth day in the longest streak since May, climbing three basis points to 175. Daimler fell one basis point to 114. A decline signals improvement in perceptions of credit quality.
Securities of steelmaker ArcelorMittal led price gains in Bank of America Merrill Lynch’s Euro Non-Financial index of investment-grade securities.
Luxembourg-based ArcelorMittal’s 4.625 percent notes due 2017 rose 0.48 cent to 103.61 cents on the euro, according to data compiled by Bloomberg.
The bonds rose as Posco, the South Korean steelmaker, said it’s considering buying a stake in ArcelorMittal’s Canadian iron ore unit. A consortium including Posco may seek to buy about 10 percent in ArcelorMittal Mines Canada that may be worth $1 billion, MoneyToday reported earlier.
The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings fell two basis points to 536. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was unchanged at 131 basis points.
The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell one basis point to 179 and the subordinated index declined one to 309.
A basis point on a credit-default swap protecting 10 million euros ($12.7 million) of debt from default for five years is equivalent to 1,000 euros a year. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.