Dollar General, CNPC Lead $24 Billion of U.S. Bond Offerings

Sales of corporate bonds in the U.S. rose to at least $24 billion, the third straight week of below-average issuance, while relative yields narrowed.

China National Petroleum Corp., the country’s largest oil producer, issued $2 billion of debt and Goodlettsville, Tennessee-based Dollar General Corp. raised $1.3 billion as they led sales that were 24 percent below this year’s $31.6 billion weekly average, according to data compiled by Bloomberg. The offerings follow $23.7 billion last week and $16 billion in the five days ended March 29.

Sales began to taper off when Cyprus agreed to shut the country’s second-largest bank on March 25, capping a tumultuous week aimed at avoiding a disorderly sovereign default, and helping set the stage for a 10 billion euro ($13 billion) rescue package. In the U.S., signs that the economy is faltering emerged as retail sales unexpectedly fell last month by the most since June and job creation sputtered as employers added the least to payrolls in nine months.

“The Cyprus bailout and weaker macroeconomic data may have softened investor demand a little,” Jon Duensing, head of corporate credit at Smith Breeden Associates, said in a telephone interview from Boulder, Colorado. Sales are also decelerating as companies report first-quarter earnings, he said.

Weaker Data

The extra yield investors demand to own corporate bonds rather than government debentures narrowed to 215 basis points yesterday from 221 basis points on April 5, according to Bank of America Merrill Lynch index data. Yields were unchanged at 3.48 percent. A basis point is 0.01 percentage point.

CNPC’s $750 million of 1.45 percent, three-year securities yield 115 basis points more than similar-maturity Treasuries, its $500 million of 1.95 percent, five-year notes pay a relative yield of 125 basis points and $750 million of 3.4 percent, 10-year bonds have a 165 basis-point spread, Bloomberg data show. The April 9 sale was the company’s first dollar issue in a year.

Sales of investment-grade debentures reached at least $15 billion, compared with $17.4 billion last week and a 2013 weekly average of $23.4 billion, Bloomberg data show.

Yields on investment-grade debt rose to 2.75 percent yesterday from 2.72 percent on April 5, a record-low, according to the Bank of America Merrill Lynch U.S. Corporate index. Spreads narrowed 3 basis points to 148 basis points.

Cyprus Drama

Cypriot President Nicos Anastasiades agreed to wind down Cyprus Popular Bank Pcl, 84 percent owned by the government, under pressure from a German-led bloc in a negotiating melodrama that threatened to rekindle the European debt crisis and rattle markets. Those who will be largely wiped out encompass uninsured depositors and bondholders, including senior creditors.

“There was a little bit of hesitation in the credit markets,” Anthony Valeri, a market strategist at LPL Financial LLC in San Diego, said in a telephone interview. The “first quarter was still very strong and I think we were due for a pause.”

Sales reached $419 billion in the first quarter, the second busiest on record behind $446.1 billion in the corresponding period last year, Bloomberg data show.

Dutch Finance Minister Jeroen Dijsselbloem said today a 10 billion-euro rescue for Cyprus is now ready to be ratified by parliaments, even as President Anastasiades said that he will write to EU President Herman Van Rompuy to seek “further aid,” in line with his nation’s needs.

Retail Sales

The 0.4 percent decrease in U.S. retail sales last month followed a 1 percent gain in February, Commerce Department figures showed today in Washington. The median forecast of 85 analysts surveyed by Bloomberg called for an unchanged reading in March.

Payrolls increased 88,000 in March, the smallest gain in nine months and less than the most-pessimistic forecast in a Bloomberg survey, after a revised 268,000 February increase, Labor Department data showed on April 5 in Washington. The jobless rate fell to 7.6 percent from 7.7 percent.

Dollar General, the discount retailer acquired by KKR & Co. in 2007, issued $900 million of 3.25 percent, 10-year notes at a spread of 155 basis points and $400 million of 1.875 percent, five-year securities at 120 basis points on April 8, Bloomberg data show. The debt is split-rated at Baa3, the lowest level of investment grade, by Moody’s Investors Service and BB+, the highest level of junk debt, by Standard & Poor’s.

Offerings of speculative-grade bonds reached at least $9 billion, compared with $6.4 billion last week and a 2013 weekly average of $8.2 billion, Bloomberg data show.

Yields on junk debt fell to an unprecedented 6.31 percent yesterday from 6.41 percent on April 5, according to the Bank of America Merrill Lynch U.S. High Yield index. Spreads narrowed 22 basis points to 473 basis points.

High-risk, high-yield bonds are rated below Baa3 by Moody’s and lower than BBB- at S&P.

Issuers planning sales include ONGC Videsh Ltd. with a $1.8 billion, two-part offering, Bloomberg data show.

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