(Bloomberg News) American International Group Inc. and Toyota Motor Credit Corp. extended a rebound in corporate bond offerings in the U.S. as companies sold $7.1 billion of debt.
AIG, the bailed-out U.S. insurer, sold $2 billion of bonds to repay debt and Toyota Motor Corp.'s Torrance, California- based finance arm issued $2.5 billion of notes, according to data compiled by Bloomberg. Borrowers have sold $27.2 billion of bonds this week, the most since the period ended May 27, Bloomberg data show.
Issuance is rebounding as investors gain confidence that companies holding more than $1 trillion in cash can withstand a slowing economy and Europe's debt crisis, which last month sent yields tumbling to record lows. Companies raised $17.1 billion of debt yesterday in the busiest day since May 24, locking in borrowing costs at about the lowest level on record.
"Corporations are taking advantage of the low yields," Mikhail Foux, a credit strategist at Citigroup Inc. in New York, said in a telephone interview. "Despite the volatility, everybody's expecting a pretty robust September."
Germany's Landwirtschaftliche Rentenbank sold $1.5 billion of seven-year notes, Bloomberg data show. Fluor Corp., the largest publicly traded U.S. construction company, issued $500 million of 10-year securities, while Green Bay, Wisconsin-based Associated Banc-Corp priced $130 million of debt due in March 2016 to help repay a bailout under the U.S. Treasury Department's Troubled Asset Relief Program.
Yields on investment-grade corporate bonds averaged 3.68 percent yesterday, compared with 3.45 percent, the lowest in daily data extending to October 1986, on Aug. 4, according to the Bank of America Merrill Lynch U.S. Corporate Master index. They reached 9.3 percent in October 2008, after Lehman Brothers Holdings Inc.'s bankruptcy
Companies sold $51.8 billion of bonds in the U.S. in August, the least since $33.6 billion was issued in May 2010, Bloomberg data show. Bank of America Corp. strategists forecast that investment-grade companies may issue $80 billion of debt in the U.S. this month.
AIG, based in New York, sold its bonds to refinance debt used to finance investments including mortgage- and asset-backed securities, according to a filing with the Securities and Exchange Commission.
The transaction included $1.2 billion of 4.25 percent three-year notes that yield 412.5 basis points more than similar-maturity Treasuries and $800 million of 4.875 percent, five-year senior debt that pays a 425 basis-point spread, Bloomberg data show. A basis point is 0.01 percentage point.
AIG has about $4.1 billion of bonds coming due in the next year that were issued to fund the matched investment program, which is being wound down, it said in the filing.
"One thing that we're always looking for with AIG is access to the capital markets," said Julie Burke, an analyst at Fitch Ratings, which assigns the company a rating of BBB. "That's probably more important for AIG at this point than other companies that might be issuing, because it's a window into financial flexibility."
Toyota Motor Credit issued $1.5 billion of 2 percent, five- year notes that pay a spread of 125 basis points and $1 billion of 10-year 3.4 percent debt that yields 145 basis points more than the benchmark, Bloomberg data show.