International Business Machines Corp. and BP Plc led a 25 percent jump in U.S. company bond sales this week as borrowers rushed to lock in yields at about a seven-month low before a labor report today that showed employers added fewer jobs than economists projected.
IBM, the world’s biggest computer-services provider, and London-based BP led $23.8 billion of offerings that rose from $19.1 billion in the five days ended Jan. 31, according to data compiled by Bloomberg. Issuance compares with $24.3 billion in the first week of February 2013 and follows $140.8 billion of sales last month.
Offerings increased as companies sought to borrow before the report on employment growth that MFR economist Joshua Shapiro said might be a “crapshoot.” Payrolls rose 113,000 in January, the Labor Department said, less than the 180,000 median forecast of economists in a Bloomberg survey. Investors are watching for signs of weakness in the world’s biggest economy amid a rout in emerging markets from Argentina to Turkey.
“In any given month, it’s the date on the calendar that issuers are most mindful about assessing,” Edward Marrinan, a macro credit strategist at RBS Securities in Stamford, Connecticut, said before the report. Weak jobs numbers “give a lot of people a lot of reasons to get anxious about the growth story.”
The extra yield investors demand to own corporate bonds rather than government debentures reached 193 basis points yesterday, unchanged from Jan. 31, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Index. Yields increased to 3.9 percent from 3.89 percent, and compare with a record low 3.35 percent in May. Yields last week touched 3.84 percent, the lowest since June.
IBM sold $4.5 billion of bonds in four parts including $2 billion of 3.625 percent, 10-year notes to yield 95 basis points more than similar-maturity Treasuries, Bloomberg data show. The Armonk, New York-based company also issued $1.5 billion of five-year notes in fixed- and floating-rate portions and $1 billion of two-year floaters.
BP, Europe’s second-largest oil company, issued $2.5 billion of bonds in three parts through its BP Capital Markets unit, Bloomberg data show. The largest portion, $1.25 billion of 3.81 percent, 10-year securities, priced with a relative yield of 115 basis points.
Sales of investment-grade debentures reached at least $17 billion, compared with $13.2 billion last week and a weekly average of $21.9 billion in 2013, Bloomberg data show. Offerings of speculative-grade bonds reached at least $6.8 billion, compared with $6 billion last week and a weekly average of $7.2 billion last year.
Speculative-grade bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.