Corporate bond sales worldwide are wrapping up the slowest February since 2011, signaling that five years of Fed stimulus may have run its course after companies took advantage of record-low borrowing costs to refinance debt.
Cisco Systems Inc. and Goldman Sachs Group Inc. led $283.9 billion of offerings this month, the least since $282.6 billion in February 2011 and 23 percent below January, according to data compiled by Bloomberg.
The curbed issuance is boosting demand for bonds in the secondary market, driving up prices and narrowing the extra yield investors demand to own the securities instead of similar- maturity Treasuries, according to Barclays Plc strategists.
Cisco sold the year’s largest dollar-denominated offering on Feb. 24 with $8 billion of securities to help fund share repurchases. The deal was the largest since Verizon Communications Inc.’s record $49 billion offering in September, Bloomberg data show.
NII Holdings Inc.’s $800 million of 10 percent senior unsecured notes due in August 2016 fell 10.3 cents to 46.4 cents on the dollar to yield 50.5 percent as of 12:05 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s the lowest price since the notes were issued in 2010.
The wireless carrier said it will have to “significantly” improve its operating performance and consider additional options to increase liquidity to fund its business in 2015 and thereafter, according to a statement from the Reston, Virginia- based company.
The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, narrowed 42.3 basis points for the month to 308.1, after falling by 3.6 today, Bloomberg prices show. High-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and less than BBB- at Standard & Poor’s. A basis point is 0.01 percentage point.
The extra yield investors demand to hold investment-grade corporate bonds rather than government debt fell 0.8 basis point for the day to 97.4, Bloomberg data show.