Corporate bond offerings in the U.S. fell short of the 2011 average for the fourth straight week as European leaders raced to contain the region's sovereign debt crisis.

Time Warner Inc., owner of the Warner Bros. movie studio, and General Electric Co.'s finance unit in Stamford, Connecticut, were among issuers that tapped the market for $11.4 billion of debt, 50 percent below this year's average, according to data compiled by Bloomberg. While offerings rose 32 percent from the previous period, 80 percent of issuance came on Oct. 12, the busiest day in almost a month.

Sales failed to ignite as optimism faded that politicians would reach an agreement soon to recapitalize Europe's banks. A benchmark gauge of U.S. corporate credit risk climbed yesterday from the lowest level in three weeks on concern that the global economy is faltering after third-quarter investment-banking revenue declined at JPMorgan Chase & Co. and Alcoa Inc. said profit fell short of analysts' estimates.

“The sovereign debt crisis and the threats to the global economy are the two issues that are causing most of the volatility in the marketplace,” James Barnes, who helps manage $1 billion in fixed-income assets at National Penn Investors Trust Co. in Wyomissing, Pennsylvania, said in a telephone interview. “There's more downside risk than potential on the upside.”

Spreads Narrow

The extra yield investors demand to own investment-grade corporate bonds instead of Treasuries narrowed 11 basis points this week to 254 basis points, according to the Bank of America Merrill Lynch U.S. Corporate Master index. Absolute yields on the debt fell 7 basis points to 4.07 percent after touching 4.15 percent on Oct. 11, the highest level since April 6.

Spreads on high-yield corporate bonds tightened 50 basis points to 805 this week while average yields fell 43 basis points to 9.43 percent, the Bank of America Merrill Lynch U.S. High Yield Master II index shows.

High-yield, high-risk debt is rated below Baa3 by Moody's Investors Service and less than BBB- by Standard & Poor's. A basis point is 0.01 percentage point.

JPMorgan said investment-banking revenue fell 13 percent from the second quarter as concern that Greece would default and U.S. lawmakers would fail to raise the government's debt ceiling roiled markets. Alcoa's earnings, excluding restructuring costs and tax benefits, were about 14 cents a share. The average of 15 analyst estimates compiled by Bloomberg was for 22 cents.

Swaps Rise

The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 2.2 basis points yesterday to a mid-price of 132.5 basis points, according to index administrator Markit Group Ltd.

The index, which typically rises as investor confidence deteriorates and falls as it improves, snapped two days of declines after dropping from 150.1 on Oct. 3.

Laredo Petroleum Inc., based in Tulsa, Oklahoma, sold $200 million of notes due February 2019 that were ranked Caa2 by Moody's and CCC+ by S&P on Oct. 12 in the first junk-bond offering in more than two weeks, Bloomberg data show.

J.M. Smucker Co., maker of the top selling retail brand of coffee in the U.S., issued $750 million of 3.5 percent, 10-year debt yesterday in its biggest-ever bond sale, Bloomberg data show. GE Capital Corp. sold $3 billion of notes in a two-part offering and Time Warner raised $1 billion on Oct. 12 as companies tapped the corporate bond market for $9.1 billion in the busiest day since Sept. 14.

Issuance has exceeded the 2011 weekly average of $22.9 billion just twice since the period ended June 3, Bloomberg data show.

“We're seeing more healthy undertones in the market, but a resolution in Europe is the big unknown, and until that's fully out of the way we're going to have a lot of volatility and investors are going to be focused on managing that risk,” Arthur Tetyevsky, a credit strategist at Jefferies Group Inc. in New York, said in a telephone interview.

Bloomberg News

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Company Bond Sales Still Lag

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