Bank of America Corp (NYSE:BAC) and Goldman Sachs Group, Inc. (NYSE:GS) sold the largest amount of corporate bonds in the United States this week, which is considered the busiest period over the past two months.
According to Bloomberg, at least $30 billion worth of corporate bonds were offered this week, higher than the $24.6 billion bond offerings in the previous week. The total amount of bond offerings this week is the highest since the $36.8 billion in the week that ended May 24.
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Bank of America and Goldman Sachs’ bond sales
Data compiled by Bloomberg showed that Bank of America Corp (NYSE:BAC) sold $2 billion worth of 10-year securities while Goldman Sachs Group, Inc. (NYSE:GS) sold $2.5 billion at its lowest relative yield for five-year debt since the financial crisis.
The U.S. Corporate & High Yield Index of Bank of America Merrill Lynch (BAML) showed that investors’ demand to own corporate bonds for extra yield instead of government debentures declined from 227 basis points to 219 basis points yesterday. Data from the index showed that yields also dropped from 4.13% to 3.99% compared with the record low at 3.35% in May 2.
Data from Bloomberg also showed that Bank of America Corp (NYSE:BAC) sold $2 billion of 4.1% debt due on July 2012 at a relative yield of 157 basis points. The debt has an A- rating from Standard & Poor’s (S&P). A person familiar with the transaction said that the bank plans to use the proceeds from the offering for general corporate purposes. The person requested anonymity because he has no authority to reveal any information about the deal to the public.
Bond price surged by 9 percent
According to Trace, the bond price reporting system of the Financial Industry Regulatory Authority (FINRA), bonds surged by 0.9% from the issue price to 100.8 cents on the dollar to yield 4% (a spread of 148.9 basis points) today around 9 a.m. in the morning in New York.
On the other hand, Goldman Sachs Group, Inc. (NYSE:GS) sold 2.9% in unsecured bonds due on July 2018 at a relative yield of 155 basis points, its lowest spread on five-year securities compared with the $2 billion debentures at 5.45% with a spread of 110 basis points it sold in October 2007.
Data from Trace showed that the securities went up by 0.9 cents to100.8 cents on the dollar to yield 2.72% (139.9 spread since the sale in July 16, around 9:18 A.M. in New York.
The offerings of investment grade debentures also increased to $25 billion from $23.1 billion last week. The amount was higher than the $21.9 billion weekly average this year. The sales of speculative-grade bonds also reached to as much as $5.3 billion, higher than the $1.5 billion offerings last week, but lower than the $7.3 billion weekly average for 2013.
Moody’s Corporation (NYSE:MCO)’s Investors Services rated high-yield, high risk bonds below Baa3, and lower than the BBB- rating of S&P 500 (INDEXSP:.INX). Alliance One International, Inc. (NYSE:AOI) is planning to issue an offering of $790 million worth of eight-year notes.