By Patrick McGee 
 

Five high-grade companies are tapping the debt markets with a combined $2.3 billion worth of small offerings Monday as investor appetite for bonds rebounds alongside stock prices.

New deal volume is usually meager in the shortened Thanksgiving week. Less than $1 billion of high-grade bonds were sold in the week last year, and the five-year average is just $6.25 billion, according to data provider Dealogic. By comparison, roughly $30 billion of high-grade debt was priced last week alone.

But with yields near record lows and the equity market climbing Monday, five companies--all rated triple-B, the lower end of the investment-grade spectrum--sensed an opportunity to sell bonds without having to compete with major borrowers.

British Sky Broadcasting Group PLC (BSYBY, BSY.LN)--partially owned by News Corp. (NWS, NWSA), which also owns this newswire--is offering $800 million of 10-year debt. Also, the financing arm of engineered valve maker Pentair Ltd. (PNR) is selling $600 million worth of debt in a two-part deal, and an operating arm of natural-gas processor DCP Midstream Partners LP (DPM) is selling at least $500 million worth.

The deals come as investor confidence climbs on speculation that a political deal to avert the so-called fiscal cliff of automatic spending cuts and tax increases will be averted. Markit's CDX North American Investment Grade Index, a measure of U.S. corporate-bond health, improved 4% in midafternoon trading.

In the past four weeks, buyer demand for investments perceived as safer pushed the yield gap, or spread, between corporate and Treasury bonds 0.19 percentage point wider, to 1.50 percentage points. But the dynamic is reversing Monday.

Bank bonds are leading the rebound in the secondary market, where bonds trade after they are issued. Barclays PLC's (BCS, BARC.LN) 7.625% contingent capital bond, whose value falls to zero if the bank's core capital ratio falls below a certain threshold, is trading at just 5.94 percentage points over the 10-year Treasury, versus 6.39 points last week. It is the most-active bond in Monday's market, according to MarketAxess.

Recently issued bonds, which tend to trade more often, are also outperforming Treasurys. BMC Software Inc.'s (BMC) 4.5% coupon 10-year bonds are 0.16 percentage point narrower to Treasurys, at 2.81 points, and the spread on real-estate investment trust HCP Inc.'s (HCP) 2.625% bonds due 2010 are 0.12 point tighter at 1.03 points.

In Monday's primary market, British Sky Broadcasting is selling 10-year debt at a spread of 1.57 percentage points more than Treasurys, down from a 1.60-point spread earlier in the marketing period.

Pentair has also reduced the offered yield on its three- and seven-year notes to, respectively, 1.03 and 1.65 points over Treasurys.

DCP Midstream is selling its five-year bonds at 2.0 percentage points over Treasurys, down from 2.05 points in earlier guidance.

Smaller borrowers include DDR Corp. (DDR), another real-estate investment trust, and speciality gas distributor Airgas Inc. (ARG).

Write to Patrick McGee at patrick.mcgee@dowjones.com

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