By Patrick McGee
Foreign borrowers led another rush to the U.S. debt markets
Tuesday, as companies continued to feed investors hungry for new
bonds.
A dozen highly rated companies sold $12.9 billion worth of debt,
making the session the fifth-busiest of 2012, according to data
tracker Dealogic.
Andrew Karp, head of investment-grade-debt syndicate in the
Americas at Bank of America Merrill Lynch, said buyer appetite
remains strong. "We have not seen any type of indigestion yet."
Five jumbo-size deals from foreign issuers accounted for the
bulk of volume. Australia's Westpac Banking Corp. (WBK, WBC.AU),
Swiss pharmaceutical company Novartis AG (NVS, NOVN.VX), Dutch
lender ING Bank NV, and French oil-and-gas company Total S.A. (TOT,
FP.FR) all sold $2 billion or more, while Thai lender Bangkok Bank
priced $1.2 billion.
Smaller deals from the U.S. included a $600 million offering
from Harley-Davidson Inc. (HOG) and a $700 million deal from mobile
payments provider Fiserv Inc. (FISV).
The heavy issuance is all the more noteworthy considering the
market absorbed more than $30 billion in each of the past two
weeks--the heaviest two-week period since early 2011, according to
data provider Dealogic.
Issuers hustled to market earlier in the month partly out of
fear the European Central Bank and U.S. Federal Reserve might not
make the moves to stimulate economies, and the market might have
turned sour, syndicate desks said. Instead, both central banks were
more aggressive than many anticipated, launching bond-buying
programs to quell the euro-zone debt crisis and shore up the U.S.
economy, respectively.
Mr. Karp said the moves gave investors comfort, causing credit
markets to rally. He has seen money flowing in from buyers who
would otherwise place money in Treasurys, mortgage securities or
the stock market, he said.
Last week's flow of cash into high-grade corporate bonds totaled
$2.32 billion, or double the 2012 weekly average, according to
Thomson Reuters-owned Lipper.
Accompanying the heavy demand are other conditions favorable to
borrowers: Average yields are just 2.91%, or 0.02 percentage point
from the record low, as measured by the Barclays U.S. corporate
investment-grade index, which goes back four decades. And
corporate-bond spreads--the extra yield corporate debt offers over
comparable Treasurys--hit a new 13-month low of 1.56 points on
Monday.
Westpac, in its second U.S. debt sale this year, sold $2.25
billion worth of three-year fixed- and floating-rate notes. The
fixed notes priced at a yield of 1.222%, or 0.875 percentage point
more than three-year Treasurys, while the floating-rate notes were
sold at 0.76 point over the three-month London interbank offered
rate.
The jumbo deals pushed the month's issuance to nearly $77
billion, placing the market on track to price $100 billion this
month. In September 2011, just $58.4 billion was sold. The last
$100 billion month was March.
Euan Munro, head of multiasset investing and fixed income at
Standard Life Investments in the U.K., said the corporate-bond
market is seeing heightened demand from two angles--investors of
cash-like instruments are looking for more yield, and equity
investors including major pension funds are looking for less risk.
But that dynamic can't last forever, he said.
"We've had a love affair with credit since the middle of, or
late, 2008, but we think it's getting towards the end of the road,"
he said.
Write to Patrick McGee at patrick.mcgee@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires