Cash Hoards Reduce Bond Sales

Global corporate bond issuance in April on pace to be slowest in six years.

Global corporate bond issuance is poised for the slowest April in six years as companies reduce their reliance on debt markets while sitting on cash reserves that are about the highest on record.

Company bond sales worldwide have declined 53 percent to $190 billion through yesterday, the least for an April since 2006, according to data compiled by Bloomberg. The slowdown follows a record $1.17 trillion of deals in the first quarter, when strains from Europe’s debt crisis eased and companies borrowed at interest rates that approached the lowest ever.

Swap Spreads Rise

The U.S. two-year interest-rate swap spread, a measure of debt market stress, rose for the first time in three days, increasing 1.3 basis points to 30.31 basis points. The gauge, which has climbed from 23.50 on March 28, the lowest level since August, widens when investors seek the perceived safety of government securities and narrows when they favor assets such as corporate bonds.

Molson Coors

Molson Coors sold $300 million of five-year, 2 percent notes that yield 125 basis points more than Treasuries, $500 million of 10-year, 3.5 percent securities at a 160-basis point spread and $1.1 billion of 5 percent, 30-year notes at a 190- basis point premium, according to data compiled by Bloomberg. Standard & Poor’s rated the debt BBB-, one level above junk.

‘Engraved in Stone’

Global corporate bond sales this year of $1.36 trillion through yesterday are outpacing the $1.3 trillion from the same period last year, Bloomberg data show. Issuance this month is the least since the $184.3 billion sold in April 2006.

Appetites Tempered

“Given the stronger market tone earlier in the year and all-in-yields that were near record lows, some companies front- loaded their issuance in the first part of the year, which helps explain the current slowdown in primary market activity,” Barclays credit strategist Alex Gennis said in a telephone interview.

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