Companies issued bonds at the fastest pace since the beginning of September this week as borrowing costs declined to a near five-month low in Europe.
AT&T Inc. (T:US) and BNP Paribas SA led 22 billion euros ($29 billion) of sales compared with 10.6 billion euros last week, according to data compiled by Bloomberg. The average yield on investment-grade notes dropped four basis points to 1.8 percent, the lowest since June 14, Bloomberg bond index data show.
The European Central Bank’s decision to cut its main refinancing rate to a record low of 0.25 percent yesterday will encourage borrowers. In the U.S., American employers added more workers to payrolls in October than economists forecast, fueling speculation the Federal Reserve will accelerate plans to reduce stimulus.
“Interest rate risk in the European market is benign, unlike the dollar market,” said Ray Doody, head of acquisition and leveraged finance in Europe at JPMorgan Chase & Co. in London. “We’re seeing a high level of issuance.”
In the high-yield market, German cable operator Unitymedia KabelBW GmbH, a unit of Liberty Global Inc., was among companies raising 1.6 billion euros from bonds this week, up from 250 million euros the previous period, Bloomberg data show. The Cologne-based company’s 15-year senior secured note is the longest-dated junk bond ever sold, according to Doody.
The average yield investors demand to hold speculative-grade securities dropped six basis points this week to 5 percent, the lowest since May 22, according to Bank of America Merrill Lynch index data.
In the market today, Edcon Holdings Pty Ltd., a South African clothing retailer owned by Bain Capital Partners LLC, sold 425 million euros of 5 1/2-year senior notes to yield 13.375 percent, according to data compiled by Bloomberg. The notes, which can be bought back by the Johannesburg-based company after 1 1/2 years, are rated CCC or eight levels below investment grade at Standard & Poor’s.
In high-grade issuance, WPP Plc (WPP) hired banks to arrange meetings with investors on Nov. 11 in London to market a sale of bonds in euros for the biggest advertising company, according to a person familiar with the matter. A transaction would be the London-based company’s first in the currency since 2008, Bloomberg data show.
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