Bloomberg News

BMW Leads Jump in Bond Sales as Risk Rises on Greek Aid Concerns

November 26, 2012

Bayerische Motoren Werke AG, the luxury carmaker, and Italy’s Fiat SpA (F) led a jump in bond sales as credit risk rose for the first time in more than a week on concerns Greece will struggle to get aid.

BMW is selling at least 500 million euros ($648 million) of bonds due June 2018, while Fiat is adding to its 7.75 percent notes due 2016, according to people with knowledge of the deals. Corporate borrowers are raising at least 3.6 billion euros from bond sales today, more than the 2.6 billion-euro daily average for the year, according to data compiled by Bloomberg.

Bond risk rose amid speculation euro-area finance ministers will struggle to work out a deal to unlock aid-package funds to Greece today, less than a week after the first attempt failed. Investor sentiment was also dented as U.S. leaders wrestle with an agreement to avoid triggering tax increases and spending cuts in January that could lead to a recession.

Companies are also selling debt now to take advantage of yields near record lows and because “it’s the last window” of issuance for the year, said Frank Hussing, a credit analyst at Commerzbank AG in Frankfurt.

The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield ratings rose eight basis points to 502, signaling deterioration in perceptions of credit quality. The gauge had fallen 55 basis points last week in the biggest weekly decline since September.

Yields Rise

Yields on corporate bonds rose last week to 1.93 percent on average, up from a record 1.88 percent on Nov. 11, according to Bank of America Merrill Lynch’s EMU Corporates, Non-Financials index. That compares with 3.33 percent at the start of the year.

BASF SE, the world’s largest chemicals company, and Belgian water company Eandis CVBA and are both marketing benchmark-sized sales in euros, people with knowledge of the deals said. Nestle SA (NESN), the world’s biggest food company, plans to sell 11-year bonds in pounds.

Fiat, which has 1 billion euros of 6.625 percent bonds coming due in February, led declines in Bank of America Merrill Lynch’s Euro Non-Financial High-Yield Constrained Index today. The Turin-based carmaker’s 7.75 percent bonds due 2016 fell 1 percent to 102.42 cents on the euro, pushing the yield to a one- week high of 7.1 percent, data compiled by Bloomberg show.

Spain’s Banco Bilbao Vizcaya Argentaria SA is selling five- year covered bonds to yield about 260 basis points more than the benchmark swap rate, according to a banker with knowledge of the deal. That compares with 155 basis points that Spain’s second largest lender paid in March 2011 to sell 2 billion euros of 2015 covered bonds, the last benchmark-sized sale of the secured debt, Morgan Stanley and Deutsche Bank AG data show.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose two basis points to 123. Bank bond risk also climbed, with the Markit iTraxx Financial Index on the senior debt of 25 banks and insurers up 3.5 basis points to 164, while subordinated debt increased 4.5 to 286.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.

To contact the reporter on this story: Hannah Benjamin in London at

To contact the editor responsible for this story: Paul Armstrong at

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