Sanofi Borrows as Credit Risk Holds at Seven-Week High in Europe

Sanofi, France’s largest drugmaker, is selling its first bonds in euros since November 2012 as credit risk held at the highest in more than seven weeks.

Paris-based Sanofi is offering 1 billion euros ($1.3 billion) of seven-year securities that will yield 27 basis points more than swaps, according to a person familiar with the deal, who asked not to be identified before it is completed. The Markit iTraxx Europe Index of credit-default swaps on 125 companies with investment-grade ratings rose 1.79 basis points to 109.3 basis points at 11:40 a.m. in London, the highest since July 10.

Markets around the world are being roiled by the prospect of the U.S., France and Britain taking military action against Syria. Yield premiums on investment-grade debt are holding near the lowest in three months at 78.6 basis points more than swaps, Bloomberg bond index data show.

“There is a wait-and-see mood in the market at the moment even as new issuance picks up again,” said Thomas Kristiansson, head of credit fixed income at SEB AB in Stockholm. “People are hesitant to add more risk as they don’t know how big the response from the U.S. and its allies against Syria will be and the outcome of any action.”

The European Financial Stability Facility is offering 3 billion euros of bonds due September 2034 that will yield 37 basis points more than the benchmark swaps rate.

Also in the new issue market, Finland is selling five-year bonds in euros to yield 16 basis points below the mid-swap rate.

The Markit iTraxx Crossover Index of default swaps on 50 high-yield companies rose 4.72 basis points to 442.85 basis points, the highest since July 5. The average yield investors demand to hold junk-rated euro bonds climbed to 4.9 percent, the highest in almost six weeks.