Fed Taper Question Keeps U.S. Corporate Bond Sales Below Average

Corporate bond sales in the U.S. held below the average of the past year for a second week as issuers waited for signals in the Federal Reserve’s meeting minutes on the pace of stimulus reduction.

Novartis AG and Comcast Corp., the biggest U.S. cable operator, led offerings of at least $26 billion, up from about $21.3 billion last week, according to data compiled by Bloomberg. Offerings rose 22 percent this week to the most since $28.6 billion in the five days ended Feb. 7 and compared with a weekly average of $28.5 billion during the past 12 months.

Borrowers curbed issuance before minutes of the Federal Open Market Committee’s January meeting released on Feb. 19, where policy makers said they would soon have to modify their year-old commitment to keep their benchmark interest rate near zero until unemployment falls below 6.5 percent. The central bank also decided to press on with a second reduction of $10 billion to its monthly bond buying.

“Many issuers likely wanted to see the market’s reaction to the minutes from the FOMC January meeting before committing to bringing a transaction,” Edward Marrinan, a credit strategist at RBS Securities, said in an e-mail.

Smaller financial institutions with modest funding requirements borrowed this week, after the benchmark deals of global banks last week, according to Marrinan. JPMorgan Chase & Co., the biggest U.S. bank and Bank of America Corp. were among issuers of more than $500 million.

Novartis, Comcast

The extra yield investors demand to own corporate bonds rather than government debentures reached 183 basis points yesterday, down from 186 basis points on Feb. 14, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Index. Yields decreased to 3.83 percent from 3.84 percent, and compare with a record low of 3.35 percent in May.

Novartis Capital Corp., a unit of the Basel, Switzerland-based pharmaceuticals maker, issued $2.15 billion of 3.4 percent, 10-year notes and $1.85 billion of 4.4 percent, 30-year bonds to yield 77 basis points more than similar-maturity Treasuries, Bloomberg data show. Proceeds may be used for paying down existing debt and general corporate purposes, the data show.

Comcast raised $2.2 billion in its first bond sale after agreeing to buy Time Warner Cable Inc. for $45.2 billion in stock last week. The Philadelphia-based company issued $1.2 billion of 3.6 percent, 10-year notes to yield 93 basis points more than similar-maturity Treasuries and $1 billion of 4.75 percent, 30-year debt to yield 110 basis points more than benchmarks, Bloomberg data show.

Sales of investment-grade debentures reached about $24 billion, compared with $16.7 billion last week, Bloomberg data show. Offerings of speculative-grade bonds reached at least $2 billion, compared with $4.7 billion last week.

Speculative-grade bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s.

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