UPDATE 2-US company bond sales fall near recession levels

(Adds details, new quotes, byline)

By Walden Siew

NEW YORK, Sept 30 (Reuters) - U.S. corporate bond sales fell in the third quarter to the lowest levels since before the last U.S. recession in 2001, and some companies are delaying bond sales until 2009, a senior Thomson Reuters analyst said on Tuesday.

U.S. investment-grade sales fell to $72.2 billion for the third quarter of 2008, a 68 percent decline from the third quarter of 2007 and the slowest quarter since the last three months of 1999, Thomson Reuters data showed.

U.S. high-yield sales fell 51 percent to $4.5 billion for the third quarter of 2008, the slowest quarter since the last three months of 2000, just before the last U.S. recession lasting from March 2001 to November 2001.

Concerns about the duration of a year-long credit crisis and the outcome of a U.S. bailout plan for the financial industry may continue to stall new sales. The plan was rejected by the U.S. House of Representatives on Monday but optimism that a bill would pass the U.S. Senate sparked gains in the stock market on Tuesday.

"Syndicate desks are delaying sales until 2009," said Chris Reich, senior analyst for investment-grade bonds at Thomson Reuters IFR. "Everyone is hoping for a bailout but hope is not a good strategy."

"Some companies don't need to issue," he said. "Given all the volatility and uncertainty, some issuers are just saying they'd rather wait until next year."

Banc of America Securities LLC was the top underwriter of high-yield bonds in the third quarter, while JPMorgan Chase & Co was the top ranked for investment-grade sales in the third quarter, according to Thomson Reuters.

"Issuance is certainly down dramatically for this quarter as a result of many days when market-moving events effectively closed the market," said Jim Turner, head of debt capital markets for BNP Paribas in New York.

Looking forward, Turner said it would be "extraordinarily difficult" for financial issuers to tap bond markets.

Sylvain Raynes, co-founder of R&R Consulting, a structured finance consultancy in New York, criticized a planned U.S. bailout as unnecessary.

"We don't need a bailout," Raynes said. "We need a way to fair value structured securities."

U.S. President George W. Bush eased pressure on financial markets Tuesday with assurances that a $700 billion bailout for the financial sector can be revived. U.S. lawmakers rejected the plan on Monday, spurring a massive drop in U.S. stocks including a 777.68-point drop in the Dow Jones Industrial Average, its largest point decline ever.

Congress was not in session on Tuesday because of a Jewish religious holiday. The Senate could take up bailout legislation as early as Wednesday. The House is to return on Thursday.

"Corporate bonds are dead," Raynes said. "Nothing will happen until the New Year, and even then the deals will be slow in coming."

Other analysts said a successful bailout plan may begin to help thaw out frozen credit markets.

"In the high-yield corporate market, money is available for investment in new issues," said Martin Fridson, founder of Fridson Investment Advisors, a New York-based fund with $240 million under management.

"The key to building up volume is to complete some deals and see them trade to a bit of a premium," Fridson said. "That will give other issuers confidence that they can get good execution despite the recent turmoil." (Additional reporting by Dena Aubin; Editing by Theodore d'Afflisio)