Jan. 9 (Bloomberg) -- Spain’s Gas Natural SDG SA sold 10-year bonds, joining a rush of borrowers tapping investor demand for higher-yielding corporate assets.
Gas Natural priced 600 million euros ($785 million) of notes due 2023, a day after Madrid-based Telefonica SA sold similar-maturity securities. Offerings from Bank of Ireland Plc, France’s Veolia Environnement SA and HSBC Holdings Plc boosted today’s issuance to 4.7 billion euros, almost double last year’s daily average, data compiled by Bloomberg show.
Companies are taking advantage of record-low rates to sell debt to investors seeking alternatives to the safest government securities. Investment-grade corporate bonds yield 1.98 percent on average, down from 4.3 percent a year earlier, Bank of America Merrill Lynch’s Euro Corporate index shows.
“Markets are very buoyant at the moment and any corporate that can, should come to the market now and lock in historically low coupons and yields,” said Andrew Wilmont, head of European high yield at Alcentra Ltd. in London.
Corporate bond yields relative to sovereign debt fell to a five-year low of 134 basis points, according to Bank of America Merrill Lynch, compared with 301 basis points at the start of 2012. The spread over the benchmark swap rate narrowed to 124 basis points.
Gas Natural’s bonds were priced to yield 230 basis points more than swaps, data compiled by Bloomberg show. It’s the fourth 10-year deal issued by a peripheral corporate issuer since January 2012, according to Societe Generale SA.
Spanish borrowers including Banco Bilbao Vizcaya Argentaria SA, Banco Santander SA and Telefonica are leading bond sales this year as investors hunt higher returns from relatively riskier assets. CaixaBank SA marketed three-year notes today, while builder Ferrovial SA planned a bond roadshow for next week, said people familiar with the deals who asked not to be named because they’re not authorized to speak about it.
“Periphery names will take advantage of the fact that a number of investors are underweight periphery and want to change that,” said Tatjana Greil Castro, a London-based portfolio manager at Muzinich & Co. Ltd., which oversees $14 billion of high-yield assets.
Bank of Ireland is selling so-called contingent convertible capital securities that the Irish government acquired in 2011 as part of a recapitalization of the nation’s lenders. Veolia, the world’s biggest water company, is marketing subordinated bonds in euros and pounds.
Bonds of ArcelorMittal, the world’s biggest steelmaker, climbed to a record after the company announced plans to raise about $3.5 billion from a sale of stock and convertible bonds to cut debt. Its 4.5 percent 2018 securities rose 1.5 percent as the cost to insure the company’s debt with credit-default swaps fell to a 17-month low.
The Markit iTraxx Crossover Index of credit-default swaps linked to 50 companies with mostly high-yield credit ratings fell three basis points to 425 basis points. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was little changed at 103.
A basis point on a credit-default swap protecting 10 million euros ($13.1 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.
To contact the reporter on this story: Hannah Benjamin in London at firstname.lastname@example.org
To contact the editor responsible for this story: Paul Armstrong at email@example.com