By Patrick McGee
Ford Motor Co. (F) is tapping the investment-grade market for
the first time since 2005 after officially returning to the
high-grade index last week. Low yields and improving sentiment are
seducing the auto maker, American Express (AXP) and others into the
market.
The CDX North America Investment Grade Index, a proxy for risk
sentiment, improved 2.7% in early trading, placing it at its best
level since May 29, according to Markit. And, in the backdrop,
equities are up 0.75%.
The flight to safety stemming from renewed turmoil in Europe has
created an attractive climate for borrowers to issue bonds, as the
Treasury yields their borrowing costs are based on have plummeted.
For investors, the extra yield on corporate bonds appears more
lucrative, even though the rise in yields has been modest.
Barclays puts the gap between corporate and Treasury yields at
213 basis points, compared with 182 a month ago. Yields are up five
basis points to 3.39%.
Thursday's deals add to the $7 billion in new volume from
Tuesday and Wednesday, according to Dealogic. Syndicate desks were
expecting roughly $10 billion of issuance this week and $30 billion
to $60 billion for the month.
Ford's five-year bond sale comes just two weeks after it
received an upgrade from Moody's Investors Service, putting it back
into the high-grade category, following an upgrade from Fitch
Ratings a month before. Its bonds officially moved into the
Barclays investment-grade index last Friday, returning after some
seven years in the high-yield universe.
Ford last sold investment-grade bonds in March 2005, according
to Dealogic. These bonds are being sold through Ford Motor Credit
Corp.
American Express is selling three-year notes, Viacom (VIA) is
selling a $300 million deal of three- and 10-year notes, and
Safeway Inc. (SWY) is issuing $250 million of 18-month
floating-rate debt.
Houston-based Gulf South Pipeline, a unit of Boardwalk Pipeline
Partners (BWP), is also in the market with a $300 million sale of
10-year bonds, marking its first deal since August 2007, according
to Standard & Poor's LCD.
Pricing guidance on each deal hasn't been released yet.
Lastly, General Electric Capital Corp. (GEN.XX) is selling
subordinated preferred notes. These offer a fixed-rate for the next
10 years, at which point they convert to perpetual floating-rate
notes with a quarterly dividend, until GE redeems them.
Write to Patrick McGee at patrick.mcgee@dowjones.com