Company Borrowing Costs Rise in Europe as U.S. Shutdown Extends

Borrowing costs for investment-grade companies rose to the highest in two weeks in Europe amid concern the partial U.S. government shutdown will merge with the fight over increasing the nation’s debt limit.

The average yield investors demand to hold euro-denominated corporate bonds climbed 8 basis points to 2 percent, the highest since Sept. 18, Bloomberg bond index data show. The cost of protecting the debt against losses also rose, with the Markit iTraxx Europe Index of credit-default swaps on 125 high-grade borrowers climbing 1 basis point to 100 basis points at 11:10 a.m. in London.

The first day of the shutdown ended with no talks scheduled between the White House and Congress, raising concerns the deadlock will compound another standoff over the debt ceiling. Officials have about two weeks to agree to increase the government’s $16.7 trillion borrowing limit and allow it to continue paying its debts.

“If the shutdown isn’t resolved by the 17th, when the Treasury says funds will run out, the discussions will bleed into the debt ceiling negotiations in Congress,” said Joseph Faith, a credit strategist at Citigroup Inc. in London. “The closer to the deadline we get, the more likely it is that the market will begin to worry about a technical default, as unlikely as it seems.”

The average yield premium for euro-denominated securities over the benchmark mid-swap rate rose 3.8 basis points to 88 basis points, the widest spread since Sept. 11, according to Bloomberg bond index data.

New Issuance

In the new issue market today, Belgian electricity and natural gas distributor Eandis CVBA is raising 500 million euros ($677 million) from 10-year bonds to yield 85 basis points more than swaps, according to a person familiar with the matter.

Sponda OYJ, a Finnish property investor, is selling 150 million euros of notes due October 2018 yielding 220 basis points more than swaps, while Helsinki-based lender Aktia Bank Oyj is marketing 300 million euros of four-year notes at a spread of 85 basis points.

Oberthur Technologies, a provider of security services based in the Paris suburb of Levallois-Perret, started meeting investors in Europe today to market a debut sale of 200 million euros of 6 1/2-year senior notes. The proceeds from the bonds, to be issued through the company’s Oberthur Technologies Holding SAS unit, will be used to help repay debt drawn from credit facilities, according to a person familiar with the matter.

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