BMW Selling Bonds in Pounds as Borrowing Costs IncreaseJohn Glover
Bayerische Motoren Werke AG is selling bonds in pounds after borrowing costs in the currency climbed by the most in two months amid speculation U.K. interest rates will increase sooner than expected.
The world’s biggest maker of premium cars is selling 300 million pounds ($480 million) of four-year notes to yield 85 basis points more than U.K. government debt, according to a person familiar with the matter. The average yield on sterling-denominated investment-grade bonds rose 8 basis points to 3.6 percent, the biggest jump since Sept. 5, Bloomberg bond index data show.
With U.K. unemployment forecast to fall to a four-year low of 7.6 percent in the third quarter, companies are speculating the Bank of England will increase rates earlier than 2016. That’s when the central bank projected the jobless rate to reach 7 percent, its threshold for tightening policy.
“The U.K. is one of the markets that’s been growing the most,” said Mondher Bettaieb-Loriot, who manages the equivalent of about $1 billion at Vontobel Asset Management Ltd. in Zurich. “BMW may have decided they need the funds in place to offer the financing to meet demand from buyers and they want to get it done before yields go up.”
Elsewhere in European credit markets, Granvia AS, a Slovakian building services company, hired banks to arrange investor meetings starting Nov. 13, according to a person familiar with the plans. A bond sale would be the first for the Bratislava-based company, data compiled by Bloomberg show.
The average yield on euro-denominated securities rose 5 basis points to 1.9 percent, the biggest increase since Oct. 1, according to Bloomberg bond index data. The cost of insuring the debt against losses held at the lowest in 3 1/2 years, with the Markit iTraxx Europe index of default-swaps on 125 investment-grade companies little changed at 82 basis points.