This week, distilling giant Diageo plc (LON:DGE) and International Business Machines Corp. (NYSE:IBM) led in U.S. corporate bond sales at $27.6 billion.
From a three-part offering, Diageo, the Johnnie Walker Scotch whisky and Guinness beer seller, raised $2.5 billion while IBM sold $1.5 billion in debt; this included seven-year notes with a record-low coupon, according to Bloomberg.
For the week, sales came in slightly lower as compared to last week’s sales of $32.6 billion and 2010’s weekly average of $30.1 billion.
Also dipping its toes into the bond market this week was Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) amid all the political happenings in Europe by issuing $1.6 billion of bonds. Ford Motor Company (NYSE:F) was also active and sold $1.25 billion of bonds. This came after Fitch Ratings recent increase of the company’s credit ranking to investment grade. Moody’s Corporation (NYSE:MCO) Investors Service and Standard & Poor’s have kept Ford at junk status.
Overall it wasn’t a good week for U.S. investment-grade debt as it hit all-time lows during the week. Anthony Valeri, LPL Financial market strategist, said in a phone interview with Bloomberg, “In a world of dwindling quality debt instruments, there’s going to be demand for the IBMs and the Berkshires of the world, and for other high-quality issuers.”
On the rise this week for investment-grade corporate bonds was spreads, increasing 3 basis points to 203 basis points (2.03 percentage points), per Bank of America Merrill Lynch’s U.S. Corporate Master index. Yields dropped to a low of 3.33 percent on May 8 but bounced back to 3.35 percent on Thursday.
European Crisis Concerns
This week, investment-grade bond sales dropped to $22.3 billion, down from the previous week’s $26.8 billion; this represented the greatest decline in almost seven weeks, according to Bloomberg. The weekly average has been $23.2 billion.
Investor concern continued to rise this week after France elected a new president, socialist leader Francois Hollande while Greece’s election was less decisive. Rumors are now swirling that Greece could leave the euro zone.
Notes, Bond Activity by Diageo, IBM
In addition to their corporate bond activity this week, Diageo and IBM also actively sold notes and 30-year bonds.
According to Bloomberg, Diageo sold $1 billion in five- and 10-year notes each and in 30-year bonds, $500 million. IBM sold $900 million of 0.75 percent, three-year notes (yield of 45 basis points) and seven-year bonds valued at $600 million. This came in at a record-low 1.875 percent with a 65 basis-point spread.
Doug Shelton, IBM spokesman, said to Bloomberg that the issue’s proceeds “will be used for general corporate purposes, which could include refinancing long-term maturities and commercial paper, or funding acquisitions.”