(Bloomberg News) Sales of corporate bonds in the U.S. fell 53 percent this week and relative yields widened for the first time this month as companies missed sales estimates and economists lowered their growth forecast for next year.
Reynolds American Inc., the second-biggest U.S. tobacco company, and Houston-based Plains Exploration & Production Co. led borrowers selling $20.6 billion, down from $44.3 billion last week, according to data compiled by Bloomberg. Offerings compare with a weekly average of $28.2 billion this year.
Concern mounted that the economy is wavering as 59 percent of Standard & Poor's 500 companies that have reported third-quarter earnings missed analysts' revenue estimates. Relative yields for U.S. investment-grade and high-yield bonds rose 1 basis point this week to 224 basis points yesterday, Bank of America Merrill Lynch index data show.
"Top line growth is sort of a sticky point," Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview. With the swings in material costs, "it really has come down to how well companies can drive volume," she said.
Growth in the U.S. is expected to slow to 2 percent next year, down from a 2.1 percent estimate in September, according to analysts surveyed this month by Bloomberg.
Spreads widened this week for the first time since the five days ending Sept. 28, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Master index. Yields increased to 3.625 percent from an unprecedented low of 3.578 percent on Oct. 19.
Reynolds Sale
Sales of investment-grade debentures reached at least $9.9 billion, compared with $31.5 billion last week and a 2012 weekly average of $21.6 billion, Bloomberg data show.
Reynolds raised $2.55 billion in its first bond sale in more than five years. The Winston Salem, North Carolina-based company sold $450 million of 1.05 percent, three-year notes at a relative yield of 70 basis points, $1.1 billion of 3.25 percent, 10-year securities at a spread of 150 basis points and $1 billion of 4.75 percent, 30-year debt at 190 basis points, Bloomberg data show.
The bonds due November 2022 rose 0.3 cent from the issue price to trade at 100.2 cents yesterday for a yield of 3.23 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Yields on investment-grade debt increased to 2.817 percent yesterday from 2.766 percent Oct. 19, and compare with a record low 2.763 percent on Oct. 15, according to the Bank of America Merrill Lynch U.S. Corporate Master index. Spreads increased 1 basis point to 148 basis points.
Speculative Grade