Repsol SA sold euro-denominated bonds as the extra yield investors demand to hold investment-grade company notes instead of government debt dropped to the lowest in more than three weeks in Europe.
Spain’s largest oil producer marketed 1 billion euros ($1.35 billion) of eight-year securities, according to data compiled by Bloomberg. The average spread on corporate bonds in euros narrowed 2 basis points last week to 96.4 basis points, the least since Aug. 27, Bloomberg bond index data show.
Companies raised debt as data showed euro-area services and manufacturing growth accelerated to the fastest in more than two years in September. Markets were also reassured by German Chancellor Angela Merkel’s overwhelming endorsement from voters, which puts the leader of Europe’s largest economy on course for the biggest election win since Helmut Kohl’s post-reunification victory of 1990.
“Merkel’s win has taken away some of the uncertainty and insures continuity for the European project,” said Luis Merino, a Madrid-based fund manager who helps oversee about 20 billion euros of assets at InverCaixa Gestion SGIIC SA, the asset manager of CaixaBank. “There’s a certain amount of calm and a window for companies to issue. As the European economy improves, medium- and long-term rates could rise so now is the time for companies to sell bonds.”
Repsol issued the bonds through its Repsol International Finance BV unit to yield 175 basis points more than the benchmark mid-swap rate. The Madrid-based company’s 1.2 billion euros of seven-year notes sold in May were priced at a spread of 155 basis points, Bloomberg data show. It was the cheapest deal for a Spanish company since the euro currency was introduced, a spokesman for Repsol said at the time.
Repsol has 2 billion euros of bonds maturing next year, according to data compiled by Bloomberg. Kristian Rix, a spokesman for the company in Madrid, declined to comment on the bond sale.
“There’s good demand for this deal,” said Jose Ignacio Victoriano, a fixed income manager overseeing about 1 billion euros of bonds at Renta 4 Gestora SGIIC SA in Madrid. “Repsol has some refinancing to do for next year and this is a good time to sell. The German election result is the best we could have hoped for and especially supports peripheral credit.”
Abengoa SA, a junk-rated Spanish developer of solar-thermal power plants, plans to add another 250 million euros to its 8.875 percent notes due February 2018 issued in January, according to a person familiar with the plan. The Seville-based company, rated B2 or five steps below investment grade by Moody’s Investors Service, is seeking to refinance existing debt.
The average yield investors demand to hold speculative-grade securities fell 16 basis points to 4.79 percent last week, the lowest since Aug. 20, Bloomberg index data show.