Amgen Inc. and Peabody Energy Inc. led $38.2 billion of corporate bond sales this week, the most in more than five months, as economists lowering the odds of a U.S. recession overshadowed Europe’s debt crisis.
Amgen, the world’s largest biotechnology firm, issued $6 billion of debt in the biggest bond offering since March, according to data compiled by Bloomberg. St. Louis-based Peabody Energy, the U.S. coal producer, sold $3.1 billion of notes to finance its acquisition of MacArthur Coal Ltd., the data show.
Issuance climbed 38 percent from last week with borrowers from Israel’s Teva Pharmaceutical Industries Ltd. to Encana Corp., Canada’s biggest natural-gas producer, selling corporate debt as yields fell. Sales reached $20.7 billion on Nov. 7, the busiest day since May 27, after European Central Bank executive board member Juergen Stark predicted the region’s debt crisis will be under control within two years.
“The market recognizes and appreciates that as dysfunctional as a lot of the headlines make things appear, there’s some comfort that the powers that be are working to come to some solution sooner rather than later,” John Hines, global head of investment-grade syndicate at Wells Fargo & Co. in Charlotte, North Carolina, said in a telephone interview.
Investment-grade corporate bond yields fell to 3.8 percent yesterday from 4.15 percent on Oct. 11, the highest since April, according to Bank of America Merrill Lynch index data. Yields on high-yield, high-risk bonds, rated below Baa3 by Moody’s Investors Service and less than BBB- by Standard & Poor’s, fell to 8.75 percent from 10.2 percent on Oct. 4, the index data show.
Companies sold $40.8 billion of bonds during the week ended May 27, Bloomberg data show. Bond markets in the U.S. are closed today for the Veterans Day holiday.
The U.S. economy will grow by 2.2 percent next year, according to the median forecast of 63 economists surveyed by Bloomberg. That’s up from 2.0 percent in last month’s poll. The chance of renewed recession fell to 25 percent from 30 percent, economists in the survey said.
Italy’s 10-year bond yield, which climbed to a record on Nov. 9, fell 35 basis points, or 0.35 percentage point, to 6.87 percent yesterday as the ECB bought the country’s debt. Former ECB vice president Lucas Papademos was named to lead a unity government in Greece.
Peabody Energy’s sale of seven- and 10-year notes led junk bond issuance of $7.58 billion, Bloomberg data show. WPX Energy Inc. and Health Management Associates Inc. also sold bonds as offerings surpassed the 2011 weekly average of $5.11 billion for the third straight period after falling short for 12 consecutive weeks.
Amgen will use proceeds from its offering to finance $5 billion of share repurchases and for general corporate purposes, the Thousand Oaks, California-based company said in a filing with the Securities and Exchange Commission. The transaction, which included three-, five-, 10- and 30-year debt, was the largest since Verizon Communications Inc. issued $6.25 billion of bonds on March 23, Bloomberg data show.
Amgen’s offering was “the epitome of a credit boom,” Brian Reynolds, chief market strategist at New York-based WJB Capital Group Inc. said in a telephone interview. Investors saw the offering “as a buying opportunity instead of a selling opportunity” even with the company planning to use the money for shareholders’ benefit, he said.
“More CEOs are likely to see that and do similar types of deals in the months ahead. It’s probably going to be this way through the annual December and January corporate bond issuance surge,” Reynolds said.