US corporate debt market shows signs of life
NEW YORK, Dec 3 (Reuters) - A flurry of small debt sales by U.S. non-financial companies has emerged in the past two days, raising hopes that the bond market is returning to life.
The past week has seen few issues outside of the financial sector, where banks have been taking advantage of the government's Temporary Liquidity Guarantee Program, or TLGP.
The program launched last week offers Federal Deposit Insurance Corp backing for debt issues by financial institutions of no longer than 3 years.
So far, U.S. banks have sold $31 billion of debt under the program with deals from Citigroup, Morgan Stanley, Bank of America and Goldman Sachs, among others. For more, see [ID:
Concerns that bank issues carrying a government guarantee would make it harder for other issuers to successfully tap the market were partly allayed on Tuesday when several household name companies and some smaller issuers sold debt.
Caterpillar (CAT.N) sold $1.5 billion of debt in a three-part deal with 5-year notes yielding 535 basis points over comparable Treasuries, 10-years yielding 525 basis points and 30 years yielding 510 basis points.
" All in all, most felt pricing looked pretty cheap for Caterpillar Inc - not wrong, but cheap and likely reflective of current market conditions and low Treasury yields," said IFR analyst Andrea Johnson.
Hewlett-Packard (HPQ.N) sold $2 billion of five-year notes on Tuesday at a yield spread of 460 basis points over Treasuries.
Utility Con Edison sold $600 million of 10-year notes at a yield spread of 450 basis points over Treasuries. Washington Gas Light Co sold $50 million of 10-years at a spread of 475.4 basis points over Treasuries.
Enterprise Products Operating LLC was the biggest non-financial sale expected on Wednesday. The company, a unit of natural gas pipeline operator Enterprise Products Partners, is planning to sell $500 million of 5-year notes, according to IFR, a Thomson Reuters service.
The deal may prove a good test of the market as the issuer is rated just one notch above speculative, or "junk" status by Moody's, Standard & Poor's and Fitch.
Another B-rated issuer, Potomac Electric Power Co (POM.N), sold $250 million of 30-year bonds on Wednesday. The deal sold at par to yield 7.9 percent, just below price guidance that was in the 8 percent range, according to IFR.
Moody's rates Potomac at "Baa1" and Standard & Poor's rates it "BBB-plus", or three notches above junk. Fitch rates it "A", which is sixth-highest investment grade in its scale.
Jamie Jackson, portfolio manager at RiverSource Investments in Minneapolis, Minnesota, said he has steered clear for now of the government-backed banking issues, finding better value elsewhere.
"The yields that are being offered in some of the other sectors like corporate bonds and mortgage-backed securities we think are actually better returns going forward," he said.
(Reporting by Ciara Linnane; Additional reporting by Lynn Adler)
