Sales of corporate bonds in the U.S. surged to the fastest pace in seven weeks, reaching at least $23 billion as relative yields narrowed.
General Electric Co. (GE:US), the largest maker of jet engines, raised $3.5 billion in three parts and Richfield, Minnesota-based Best Buy Co. (BBY:US) issued $500 million in its first sale since 2011, according to data compiled by Bloomberg. Offerings rose from $1.3 billion last week, the slowest this year, and were the most since $36.8 billion for the period ended May 24.
Sales recovered, following six weeks of below-average issuance, as Federal Reserve Chairman Ben S. Bernanke committed to maintaining accommodative monetary policy after telling Congress in May that the central bank may begin curtailing unprecedented stimulus. The “panic selling” by investors subsided this week and stemmed outflows from mutual funds, according to Janney Montgomery Scott’s Jody Lurie.
“The market was able to digest the news and go through that hump of volatility,” Lurie, a Philadelphia-based corporate credit analyst, said in a telephone interview. Investors may be finding “a window of opportunity for getting things cheaper than a few weeks ago, ” she said.
Bernanke said July 10 after a speech in Boston that “highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy.”
The extra yield investors demand to own corporate bonds rather than government debentures fell to 230 basis points yesterday from 236 basis points on July 5, according to Bank of America Merrill Lynch index data. Yields decreased to 4.13 percent from 4.3 percent, and compare with a record low 3.35 percent on May 2, index data show.
Global high-yield funds reported $760 million of inflows this week while U.S. investment-grade funds reported a $320 million outflow, according to report yesterday from Bank of America Corp.
GE Capital’s finance unit sold $900 million of two-year, floating-rate notes on July 9 to yield 38 basis points more than the three-month London interbank offered rate and $1.35 billion of floaters due July 2016 to pay a relative yield of 65 basis points, Bloomberg data show.
The technology and financial services provider’s $1.25 billion of 1.5 percent, three-year debt yielded 83 basis points more than similar-maturity Treasuries, the data show. Fairfield, Connecticut-based GE’s bonds are expected to be rated A1 by Moody’s Investors Service.
Best Buy, the world’s largest consumer-electronics retailer, sold $500 million of 5 percent, five-year securities yesterday, Bloomberg data show. The debentures paid a spread of 359.9 basis points and are expected to be rated Baa2 by Moody’s.
Issuers planning sales include TMX Finance LLC with $500 million of five-year notes and financial services company INTL FCStone Inc. with seven-year bonds, Bloomberg data show.
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