GE tops $3.19 Tril­lion Cor­po­rate Bond Sales for 2nd straight year

The Pak Banker - - Company& -

NEW YORK: Cor­po­rate bond sales world­wide lead $3 tril­lion for a sec­ond straight year, led by the high­est-ever is­suance of junk-rated debt, as bor­row­ers locked in the low­est yields on record.

Rabobank Ned­er­land, the world's largest agri­cul­tural lender, and Fair­field, Con­necti­cut-based Gen­eral Elec­tric Co.'s fi­nance unit led $3.19 tril­lion of of­fer­ings, ac­cord­ing to data com­piled by Bloomberg. Ally Fi­nan­cial Inc., Ford Mo­tor Credit Co. and 509 other spec­u­la­tive­g­rade com­pa­nies sold $287 bil­lion of debt in the U.S., smash­ing the pre­vi­ous record of $162.7 bil­lion in 2009.

Signs the global eco­nomic re­cov­ery is gain­ing strength en­cour­aged in­vestors to lend money to bor­row­ers at lower in­ter­est rates, al­low­ing John­son & John­son and Wal­Mart Stores Inc. to sell bonds at what were then record-low coupons. In the U.S., bond funds took in $234.8 bil­lion this year through Oc­to­ber, while in­vestors with­drew money from stock funds, ac­cord­ing to the In­vest­ment Com­pany In­sti­tute in Washington.

"This was a once-in-aca­reer op­por­tu­nity to re­fi­nance ev­ery­thing you pos­si­bly could," said James Kochan, who over­sees $175.6 bil­lion of bonds in Menomonee Falls, Wis­con­sin, as chief fixed- in­come strate­gist at Wells Fargo Funds Man­age­ment LLC.

Sales de­clined 18 per­cent from last year's $3.88 tril­lion as gov­ern­ments with­drew bond guar­an­tees for fi­nan­cial com­pa­nies try­ing to weather the credit cri­sis. Con­cern that Europe's sov­er­eign debt cri­sis would worsen slowed sales in the re­gion.

Yields on in­vest­ment­grade cor­po­rate bonds world­wide fell to an av­er­age of 3.36 per­cent on Oct. 11, the low­est in daily data be­gin­ning in 1996, ac­cord­ing to the Bank of Amer­ica Mer­rill Lynch Global Broad Mar­ket Cor­po­rate In­dex. Yields dropped from last year's high of 7.41 per­cent on March 17, 2009, trans­lat­ing into sav­ings for the av­er­age bor­rower of $4.05 mil­lion an­nu­ally for ev­ery $100 mil­lion of bonds sold.

Mer­rill's global cor­po­rate in­dex yielded 3.922 per­cent yes­ter­day, with the av­er­age spread un­changed at 1.69 per­cent­age points. The Bar­clays Cap­i­tal Global Ag­gre­gate In­dex of bonds has gained 0.07 per­cent this month, tak­ing this year's ad­vance to 4.26 per­cent.

Else­where in credit mar­kets, shop­ping mall de­vel­oper Simon Prop­erty Group Inc. ar­ranged a 3 bil­lion-pound ($4.6 bil­lion) loan that will help fi­nance a takeover. The U.S. Jus­tice Depart­ment is seek­ing to limit the con­trol banks and swaps deal­ers have over de­riv­a­tives clear­ing­houses and trad­ing sys­tems, and fewer Amer­i­can home­own­ers qual­i­fied for mort­gage mod­i­fi­ca­tions in the third quar­ter.

Simon Prop­erty, the largest U.S. mall owner, will ob­tain fund­ing for a pre­lim­i­nary 2.9 bil­lion pound bid for Cap­i­tal Shop­ping Cen­tres Group Plc from banks led by Cit­i­group Inc., Deutsche Bank AG, Gold­man Sachs Group Inc. and Mor­gan Stan­ley, ac­cord­ing to a state­ment from the In­di­anapo­lis-based com­pany.

The U.K. Takeover Panel gave Simon Prop­erty un­til Jan. 12 to an­nounce a "firm in­ten- tion" to make an of­fer for Cap­i­tal Shop­ping. Simon Prop­erty made a con­di­tional of­fer of 425 pence a share on Dec. 15. The bid de­pends on Cap­i­tal Shop­ping aban­don­ing a 1.6 bil­lion-pound pur­chase of the Traf­ford Cen­tre in Manch­ester, a trans­ac­tion would give Peel Group, the seller, as much as 25 per­cent of Cap­i­tal Shop­ping.

The U.S. Jus­tice Depart­ment, which has been in­ves­ti­gat­ing pos­si­ble an­ti­com­pet­i­tive prac­tices in de­riv­a­tives mar­kets, called for tighter lim­its on the con­trol banks and swaps deal­ers have over clear­ing­houses and trad­ing sys­tems.

In Oc­to­ber

the Com­mod­ity Fu­tures Trad­ing Com­mis­sion and Se­cu­ri­ties and Ex­change Com­mis­sion pro­posed a 20 per­cent cap on the own­er­ship stake any mem­ber of an ex­change or ex­e­cu­tion fa­cil­ity can have. The pro­posal didn't in­clude a limit on the ag­gre­gate stake banks and other deal­ers may have. The Jus­tice Depart­ment said the rules "will not suf­fi­ciently re­duce the risk that ma­jor deal­ers" will con­trol trad­ing sys­tems.

The num­ber of delin­quent bor­row­ers who started U.S. home loan mod­i­fi­ca­tions fell last quar­ter as fewer peo­ple qual­i­fied for eas­ier pay­ment terms, ac­cord­ing to the Trea­sury Depart­ment.

Loan ser­vicers started 470,321 mod­i­fi­ca­tion or pay­ment plans in the three months ended Sept. 30, down 17 per­cent from the pre­vi­ous quar­ter and 32 per­cent from a year ear­lier, the Trea­sury said in a re­port yes­ter­day.

The cost to pro­tect U.S. com­pany bonds was lit­tle changed at about an eight­month low. The Markit CDX North Amer­ica I nvest­ment Grade In­dex, which in­vestors use to hedge against losses or to spec­u­late on cred­it­wor­thi­ness, fell 0.1 ba­sis point to a mid-pri ce of 85.6 ba­sis points as of 5:30 p.m. in New York, ac­cord­ing to i ndex ad­min­is­tra­tor Markit Group Ltd. -Cour­tesy Bloomberg

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