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