US corporate bond sales set weekly record for 2010

NEW YORK, Sept 10 (BestGrowthStock) – U.S. corporate bond issuance
reached a weekly record for 2010, with $34.4 billion in bonds
sold this week as companies took advantage of low borrowing
costs, according to data from IFR, a Thomson Reuters service.

The sales follow one of the busiest Augusts on record, with
nearly $70 billion sold last month as falling Treasury yields
pushed corporate bond yields to all-time lows of 3.73 percent.

Demand also surged as investors sought out alternatives to
Treasuries, whose yields have tumbled on signs of a sputtering
economy.

“Demand for high-grade credit is strong — so strong that
the $100 billion of bonds issued in the past six weeks has not
led to spread widening,” JPMorgan said in a credit strategy
report on Friday. “Investors are not only absorbing this supply
but also have bought $6.5 billion in the secondary market from
dealers recently.”

JPMorgan said it is upgrading its recommendation on credit
to overweight from neutral. The bank said it expects high-grade
corporate bond spreads to tighten by about 25 basis points to
140 basis points by year end.

On Tuesday and Wednesday alone more than $30 billion of new
issues priced, more than the entire month of May, Barclays
Capital said in a credit research report on Friday.

“In general, the deals have been well-received, despite the
large volumes,” Barclays said. Most have been oversubscribed,
and nearly 40 percent were increased because of strong demand.

“Clearly the demand for paper remains strong despite the
rate environment and resulting record-low coupons,” Barclays
said.

Thanks to falling Treasury yields, the benchmark for
corporate borrowing rates, a number of companies sold debt at
their lowest-ever coupon rates.

International Business Machines (IBM.N: ) sold three-year
notes last month with a coupon of just 1 percent, the lowest
ever for any company.

Falling yields have also helped corporate bond prices,
which move in the opposite direction. Total returns on
corporate bonds, which include interest plus price changes,
topped 9.3 percent year to date, according to Bank of America
Merrill Lynch data.

If spreads tighten, those total returns could rise more.

JPMorgan said fundamentals are supporting tightening
spreads. Leverage for industrial companies in its credit index
fell for a fourth straight quarter in the second quarter as
debt levels held steady while companies increased their
earnings before interest, taxes, depreciation and amortization,
the bank said.

Cash flow was also at a 10-year high because of growing
revenue, higher Ebitda and low capital spending, the bank
said.
(Reporting by Dena Aubin; Editing by Padraic Cassidy)

US corporate bond sales set weekly record for 2010