Sales of corporate bonds in the U.S. are off to the slowest start in six years as relative yields narrow to the least since 2007.
Offerings in the first 10 days of the year were $32.5 billion, the least since $27 billion at the beginning of 2008, according to data compiled by Bloomberg. General Electric Co. (GE:US), the borrower with the most debt maturing in 2014 of any issuer in the market, sold $3 billion of bonds while Icahn Enterprises LP raised $3.65 billion in its biggest sale.
Issuance is decelerating after the busiest year ever as the Federal Reserve begins scaling back unprecedented stimulus efforts that pushed yields last year to a record low.
Most investors “took the taper announcement in stride, a reaction that smoothes the way for issuers to continue bringing deals,” Edward Marrinan, a macro credit strategist at RBS Securities, said in a telephone interview from Stamford, Connecticut. “The tone in the market has been very healthy after a slow start,” as issuance virtually shut down last week, he said.
The extra yield investors demand to own corporate bonds from the most creditworthy to the riskiest borrowers in the U.S. rather than government debentures declined to 182 basis points this week, the lowest since July 2007, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Index.
GE sold bonds in three parts through its finance unit, GE Capital, on Jan. 8, Bloomberg data show. The Fairfield, Connecticut-based company’s biggest portion was $1.5 billion of floating-rate securities due in two years to yield 23 basis points more than the three-month London interbank offered rate.
Icahn Enterprises, the New York-based holding company for billionaire financier Carl Icahn, issued bonds in a three-part offering on Jan. 8 with the largest piece a $1.28 billion issue of 4.875 percent, five-year bonds that paid a spread of 309 basis points, Bloomberg data show.
The Fed took the first step toward unwinding the stimulus that Chairman Ben. S. Bernanke put in place to help the economy recover from the worst financial crisis since the Great Depression on Dec. 18, saying it would reduce the pace of its monthly asset purchases to $75 billion from $85 billion.
Sales of investment-grade debentures this year reached at least $30.5 billion and offerings of speculative-grade bonds reached $2 billion, Bloomberg data show. A record $1.51 trillion of corporate bonds were sold in all of 2013 in the U.S., the data show.
High-risk, high-yield bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
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