Simon Property Group Inc., the largest U.S. mall owner, debuted euro-denominated bonds as the yield discount to U.S. dollar notes approached the widest in more than 4 1/2 years.
Simon sold 750 million euros ($1 billion) of seven-year securities to yield 75 basis points more than swaps, according to data compiled by Bloomberg. The average yield difference between investment-grade company bonds in euros and comparable dollar notes widened seven basis points in the past week to 1.22 percent, near the biggest discount since 2008, Bank of America Merrill Lynch indexes show.
While Federal Reserve Chairman Ben S. Bernanke holds off from scaling back stimulus in the U.S., European Central Bank policy makers signaled this week they may provide additional loans to banks to keep borrowing costs low, even amid signs the euro-area economy is strengthening. A report today shows consumer confidence in Germany improved more than economists predicted.
“The ECB still runs an accommodative monetary policy given the economic challenges the euro zone still faces,” said Rik Den Hartog, a portfolio manager at Kempen Capital Management in Amsterdam. “For Simon, it’s attractive to sell bonds in euros, since yields are at low levels and it offers an opportunity to match their funding better to their European exposure.”
Simon sold the securities through its Simon Property Group LP unit to refinance a revolving credit facility and for general corporate purposes, according to a person familiar with the matter. Les Morris, a spokesman for the company in Indianapolis, declined to comment on the sale.
Investors demand an average 2.1 percent to hold euro-denominated high-grade notes compared with 3.3 percent for dollar securities, Bank of America Merrill Lynch index data show. The yield premium over swaps for European company debt fell 18 basis points this quarter to 98 basis points, according to the data.
Also in credit markets today, Next Plc, Britain’s second-largest clothing retailer, priced 250 million pounds ($400 million) of 13-year notes to yield 147 basis points more than U.K. government debt. It was the Leicester, England-based company’s first bond sale in more than two years, Bloomberg data show.
Daimler AG, the world’s third-biggest luxury automaker, issued 750 million euros of notes maturing in April 2020 to yield 55 basis points more than swaps. The Stuttgart, Germany-based carmaker also sold 500 million euros of three-year floating-rate notes to yield 30 basis points more than the three-month euro interbank offered rate.
In the high-yield market, Italian lender Veneto Banca SCPA sold 300 million euros of notes due January 2016 to yield 4.375 percent. The Montebelluna-based bank is rated BB by Standard & Poor’s, two levels below investment grade.
-- Editors: Jennifer Joan Lee, Michael Shanahan