Oct. 25 (Bloomberg) -- Wells Fargo & Co., the largest U.S. mortgage lender, and ABN Amro Bank NV led U.S. corporate bond sales that more than doubled from last week as issuers captured borrowing costs at four-month lows.
Sales rose to $37 billion from $17.6 billion in the five days ended Oct. 18 and compare with a 2013 weekly average of $29.6 billion, according to data compiled by Bloomberg. Wells Fargo raised $3.5 billion in a two-part issue and Amsterdam-based ABN Amro sold $2.5 billion of fixed- and floating-rate bonds.
Issuance rose with borrowers and investors relieved that the U.S. avoided a default. Congress agreed last week to end the first partial government shutdown in 17 years, removing the threat of missing Treasury payments and helping to send corporate yields down to the lowest level since June. The closure trimmed at least 0.6 percent from economic growth this quarter, according to Standard & Poor’s, and could induce the Federal Reserve to postpone paring the pace of its $85 billion in monthly bond purchases until March, economists surveyed by Bloomberg said.
“A window has been opened for corporate credit to perform well for both issuers and investors alike,” Edward Marrinan, a macro credit strategist at RBS Securities, said in a telephone interview from Stamford, Connecticut. “The longer quantitative easing is delayed, the better.”
Yields on bonds from the most creditworthy to the riskiest borrowers in the U.S. fell to 3.88 percent on Oct. 23, the lowest since June 18, before reaching 3.9 percent yesterday, according to Bank of America Merrill Lynch index data. Borrowing costs decreased from 3.95 percent on Oct. 18.
The extra yield investors demand to own corporate bonds rather than government debentures fell to 209 basis points yesterday from 211 basis points, the index data show.
Wells Fargo sold $1.5 billion of 2.15 percent senior notes due January 2019 to pay a relative yield of 85 basis points that are rated A2 by Moody’s Investors Service, Bloomberg data show. The San Francisco-based bank also issued $2 billion of 5.375 percent, 30-year subordinated debt at a relative yield of 170 basis points. Those securities are expected to be rated A3.
ABN Amro, the Dutch lender, issued $1 billion of 2.5 percent, five-year securities at a 127 basis-point spread and $1.5 billion of three-year floaters that yield 80 basis points more than the London interbank offered rate, Bloomberg data show.
Offerings from banks made up 55 percent of sales this week, as lenders from Citigroup Inc. to PNC Financial Services Group Inc. raised debt after reporting third-quarter earnings, Bloomberg data show.
Investors are favoring U.S. bank bonds over securities issued by industrial companies by the most in more than six years, with bond buyers demanding an average relative yield of 138 basis points to buy financial debt compared with 146 basis points on industrials, index data show.
Sales of investment-grade debentures reached at least $30.3 billion, compared with $13.9 billion last week and a 2013 weekly average of $22.3 billion, Bloomberg data show. Offerings of speculative-grade bonds reached at least $6.7 billion, compared with $3.7 billion last week and a 2013 weekly average of $7.3 billion.
High-risk, high-yield bonds are rated below Baa3 by Moody’s and lower than BBB- at Standard & Poor’s.
To contact the reporter on this story: Sarika Gangar in New York at email@example.com;
To contact the editor responsible for this story Alan Goldstein at firstname.lastname@example.org;