Sales of corporate bonds in the U.S. declined 43 percent this week, the steepest drop in more than a month, as yields rose.
Viacom Inc., owner of the Paramount film studios, raised $3 billion in its biggest offering in about seven years and Fort Worth, Texas-based Burlington Northern Santa Fe LLC sold $1.5 billion of debt, according to data compiled by Bloomberg. Sales were the least since $1.3 billion in the five days ended July 5.
Offerings faced the biggest decline since an 87 percent drop six weeks ago as borrowing costs on the Bank of America Merrill Lynch U.S. Corporate & High Yield Index climbed 11 basis points to 4.15 percent as of yesterday, the most since a rise of 15 basis points in the week ended July 5. Yields have advanced from a record low of 3.35 percent on May 2.
Viacom issued $500 million of 2.5 percent, five-year securities at a relative yield of 125 basis points and $1.25 billion each of 4.25 percent, 10-year debt at a spread of 178 basis points and 5.85 percent, 30-year bonds at 220 basis points, Bloomberg data show. The sale was its largest since offering $5.5 billion in four parts in September 2006.
Burlington Northern, the railroad that Warren Buffett’s Berkshire Hathaway Inc. bought in 2010, issued $800 million of 3.85 percent, 10-year notes at a 117 basis-point spread and $700 million of 5.15 percent, 30-year securities at 140 basis points, Bloomberg data show.
The extra yield investors demand to own company bonds rather than government debentures was unchanged yesterday from 222 basis points on Aug. 9, Bank of America Merrill Lynch index data show. Issuance fell from last week’s $33.5 billion, Bloomberg data show.
Sales of investment-grade debentures reached at least $14.9 billion, compared with $25 billion last week and a 2013 weekly average of $22.4 billion, Bloomberg data show. Offerings of speculative-grade bonds reached at least $4.1 billion, compared with $8.5 billion last week and a 2013 weekly average of $7.3 billion.