Orange SA (ORA), France’s largest phone company, and luxury carmaker Bayerische Motoren Werke AG (BMW) led bond sales in Europe in the busiest day for non-financial corporate issuance in almost two months.
American Honda Finance Corp., a unit of the Japanese carmaker, marketed its first euro-denominated notes since 2009, according to a person familiar with the deal. Issuance from non-financial companies totaled 3.5 billion euros ($4.7 billion) today, the most since July 2, according to data compiled by Bloomberg.
Borrowers are returning to the market before “a whole host of uncertainties coming up in September,” according to Hans Lorenzen, a credit strategist at Citigroup Inc. in London. Germany goes to the polls on Sept. 22 as Chancellor Angela Merkel tries to maintain a majority with her current coalition and the Federal Reserve may begin reducing stimulus as early as next month.
“People aren’t buying because they love the outlook, but because they have money to put to work, favoring low-risk names,” said Lorenzen.
The cost of insuring corporate bonds against losses rose for a second day, with the Markit iTraxx Europe Index of credit-default swaps on 125 companies with investment-grade ratings increasing 5 basis points to 107 basis points at 3:14 p.m. in London, the highest since July 12. The Markit iTraxx Crossover Index of 50 companies with mostly speculative-grade ratings climbed 24 basis points to 437 basis points, the biggest same-day jump since June 20.
Orange raised 1.5 billion euros in a two-part bond sale. The Paris-based company, previously known as France Telecom, sold 850 million euros of five-year notes to yield 60 basis points more than the mid-swap rate and 650 million euros of securities due January 2024 offering a spread of 100 basis points more than swaps. A spokesman for Orange in Paris, who asked not to be named citing company policy, declined to comment on the bond sale.
BMW sold 500 million euros of three-year floating-rate notes to yield 22 basis points more than the three-month euro interbank offered rate as well as 750 million euros of seven-year fixed-rate bonds to yield 35 basis points more than swaps.
“This is a completely normal part of our business, which occurs on a regular basis,” said Bill McAndrews, a spokesman for BMW in Munich.
American Honda, the Torrance, California-based North American unit of Honda Motor Co., issued 750 million euros of six-year notes to yield 35 basis points more than swaps. Wells Fargo & Co. (WFC:US) and Landwirtschaftliche Rentenbank are also marketing bonds in euros.
The average spread on investment-grade corporate bonds narrowed 6.7 basis points to 78.3 basis points more than swaps, the tightest since May 31, Bloomberg index data show.
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