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Business Title: Corporate Bonds Rally by Most Since August on Greece Plan: March 1 (Bloomberg) -- U.S. corporate bond sales climbed the most this year and global returns staged the biggest rally since August last week, as concern that Europe’s fiscal crises will stifle economic growth eased. Bond offerings worldwide climbed 65 percent to $42.7 billion and U.S. sales more than tripled to $16.7 billion, according to data compiled by Bloomberg. Investment-grade securities returned 0.97 percent, the most since the period ended Aug. 14, according to a Bank of America Merrill Lynch global index. At least 16 companies, from Bombardier Inc. to Russian oil producer Alliance Oil Co., postponed bond offerings last month as growing concerns about Greece’s debt woes made February the slowest in eight years. Confidence is rebounding after German lawmakers said European Union officials are crafting a plan to grant Greece about 25 billion euros ($34 billion) in aid should the need arise. “We believe that the crisis in Europe will eventually be settled, that there will be a rescue package for Greece,” said Peter Vutz, head of corporate credit at Dwight Asset Management Co. in Burlington, Vermont, which oversees $68 billion in fixed- income assets. “It’s a slow and painful recovery, but the economic recovery will be productive and supportive of corporate credit spreads to contract.” Spreads Narrow The extra yield investors demand to own company bonds instead of government debt fell 2 basis points for the week to 167 basis points, or 1.67 percentage point, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. Spreads widened 3 basis points during the month. Yields fell to 4.04 percent, down from 4.4 percent at the end of last year, and about the lowest since September 2005. Elsewhere in credit markets, leveraged loans “continued to firm,” with new issues reaching $10.5 billion in February, the most since July 2008, JPMorgan Chase & Co. analysts led by Peter Acciavatti in New York wrote in a Feb. 26 report. Another $3.9 billion of deals were added to the calendar, bringing the pipeline to $6.5 billion, according to JPMorgan. In London, the Markit iTraxx Europe index linked to 125 companies with investment-grade ratings fell 1.75 basis points to 83.25, the lowest level since Feb. 3 after declining 4.5 on Feb. 26, according to JPMorgan Chase & Co. prices. U.S. corporate credit risk, as measured by the Markit CDX North America Investment Grade Index of credit-default swaps, declined as fourth-quarter revenue increased, helping offset investor concern stemming from a decline in sales of previously owned homes. The index, used to hedge against losses, declined 2.25 basis points to a mid-price of 89.25 basis points as of 11:38 a.m. New York time, according to broker Phoenix Partners Group. Credit Risk The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 8.5 basis points to 109 basis points, on course for its biggest one-day drop in more than five months, according to Citigroup Inc. and CMA prices. Credit swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point is 0.01 percentage point and equals $1,000 a year on a contract protecting $10 million of debt. Default insurance on Greek debt fell 22.25 basis points to 338.75, after dropping 35.6 basis points on Feb. 26, stemming four days of increases, according to CMA prices. Euro-area officials are putting together a plan under which Greece may receive about 25 billion euros of aid to be used only in an emergency because such a move would encourage investors to speculate against other euro members, according to German lawmakers, speaking on condition of anonymity because the information is confidential. Greek Bond Plans Investors expect EU Monetary Affairs Commissioner Olli Rehn will push Prime Minister George Papandreou to do more to cut the region’s biggest deficit in meetings today. Papandreou will meet with German Chancellor Angela Merkel on March 5. Greece may issue as much as 5 billion euros of 10-year notes as soon as this week. The Markit iTraxx SovX Western Europe index linked to 15 governments fell 4.5 basis points to 84 basis points, after reaching a high of 112.5 basis points on Feb. 8, according to CMA prices. In the loan market, New York-based Revlon Inc., the cosmetics maker controlled by financier Ronald Perelman, is seeking an $800 million term loan to refinance bank debt. Intergraph Corp., a Huntsville, Alabama, maker of design software, is pursuing a $300 million add-on term loan, according to the JPMorgan report. Slowest February Bond sales worldwide fell to $154.3 billion, the slowest February since 2002, from $283 billion in January. Last month’s delays, led by Montreal-based commercial airline-maker Bombardier and Stockholm-listed Alliance Oil Co., were the most since November 2007, Bloomberg data show. “There will be pockets of demand, but investors will be being more strategic in their buying and sorting the wheat from the chaff,” said Simon Ballard, a senior credit strategist at RBC Capital Markets in London. Comcast Corp., the biggest U.S. cable-television company, and Hartford, Connecticut-based United Technologies Corp. led $12.95 billion of U.S. investment-grade issuance last week, compared with $3.88 billion the previous week, Bloomberg data show. Sales for the month of $48.6 billion marked the slowest February since 2005. Comcast’s $1.4 billion of 5.15 percent notes due 2020, sold on Feb. 24, rose 1.12 cents on the dollar to 101.019 as of the end of last week. United Technologies’ $1.25 billion of 10-year, 4.5 percent notes issued Feb. 23 rose 1.707 cents on the dollar to 101.208 cents. Zayo Junk Bonds In Europe, investment-grade borrowers raised 44.3 billion euros, half the amount in the previous month and below the average for the past year of 78 billion euros. Zayo Group LLC, an operator of fiber-optic networks, is marketing $225 million of bonds as speculative-grade issuers take advantage of interest rates near five-year lows to refinance debt. High-yield bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s. In the U.S., the extra yield investors demand to own investment-grade bonds rather than the safest government securities widened 4 basis points to 185 last month, Bank of America Merrill Lynch data show. In Europe, spreads on investment-grade corporate debt widened 5 basis points to 160, the first weekly increase this year. U.S. Leads Rally U.S. corporate bond yields fell 13 basis points last week to 5.53 percent, according to the Bank of America Merrill Lynch Corporate & High Yield Master index. Yields were 5.41 percent on Jan. 21, the low since December 2004. U.S. dollar-denominated bonds led last week’s rally, returning 1.32 percent, followed by 1.26 percent for U.K. pound securities, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. Debt tied to energy and health-care companies was the top performers, with returns of 1.36 percent and 1.27 percent respectively. Investment-grade global bonds returned 16.3 percent in 2009. Even after last year’s record rally, bond investors will get better returns in investment-grade debt than “sitting in Treasuries,” said Dan Sheppard, a director in fixed-income at Deutsche Bank AG’s Private Wealth Management unit. “We’re still overweight credit even though the easy money is gone,” said Sheppard, who helps oversee $12 billion for the bank in New York. “Last year turned out to be unbelievable in terms of the return you got on credit. This year is going to be a much more difficult process.”
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#1. To: Badeye (#0)
(Edited)
This might tax your attention span a little Boof but the bottom line is that your worries about Greece can be put behind you.
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