Moody’s Shares Jump Most Since April as Profit Increases 31%

Shares of Moody’s Corp., owner of the second-largest credit rater, surged the most in almost three months after reporting a 31 percent increase in profits.

Moody’s rose 3.8 percent to $64.68 in New York, the largest gain since April 29, as the company said second-quarter earnings climbed on higher bond issuance, which boosted demand for its credit grades.

Shares earlier climbed as much as 7.6 percent to $67.05. Net income increased to $225.5 million, or $1 a share, up from $172.5 million, or 76 cents a share in the same period in 2012, the New York-based company said in a statement distributed by Business Wire.

Moody’s, whose founder John Moody helped start the credit ratings business in 1909, reported revenue of $537.3 million from grading debt, advancing from $441.2 million in the second quarter 2012, according to data compiled by Bloomberg. Sales from grading companies increased 37 percent to $262.9 million from $191.5 million. Structured finance rankings rose 7 percent to $97.2 million from $90.7 million.

Borrowing Costs

Demand for ratings services has boosted earnings as companies take advantage of borrowing costs that reached a record low last quarter. Yields on corporate bonds fell to an unprecedented 3.09 percent on May 2, according to the Bank of America Merrill Lynch Global Corporate & High Yield Index. Global issuance of $2 trillion in the first six months exceeded offerings for the period in 2012, when a record $3.98 trillion was sold for the full year, data compiled by Bloomberg show.

“Bond issuance in the first half was phenomenal,” Ed Atorino, a media analyst at research firm Benchmark Co. in New York, said in a telephone interview before the release. “June was a weak month, but before June, business was just tremendously strong.”

While issuance slowed in June amid rising interest rates on concern the Federal Reserve will pare its $85 billion of monthly bond buying, sales of corporate debentures from the U.S. to Europe to Asia increased 25 percent to $965 billion in the second quarter from a year earlier, Bloomberg data show.

McGraw Hill Financial Inc., the parent company of Standard & Poor’s, the world’s largest credit rater, reports second-quarter earnings before the market opens tomorrow.

Before it's here, it's on the Bloomberg Terminal.