DirecTV, GMAC lead issuance of bonds

New York: DirecTV, the US satellite-television provider, and Detroit-based GMAC Inc led corporate debt issuance to the highest weekly level since January as concern that European countries will struggle to manage their budget deficits dissipates.

DirecTV sold $3 billion (Dh11 billion) of notes in a three-part offering and GMAC, the auto and home lender controlled by the US Government, raised $1.5 billion, according to data compiled by Bloomberg.

US corporate bond sales rose 83 per cent from the week ended March 5 as borrowing costs fell to near the lowest this year. Investors are taking on added risk after Greece sold debt and announced tax increases and budget cuts to reduce the European Union's largest deficit.

"There was a lot of money that was ready to be put to work now that there looks tentatively like there might be a solution to Greece's problems," said Peter Vutz, head of corporate credit at Dwight Asset Management Co, which manages $68.7 billion.

Further tightening

The extra yield that investors demand to own high-risk, high-yield debt instead of Treasuries narrowed four basis points to 611, capping a second straight week of tightening, while spreads on investment-grade corporate bonds contracted one basis point to a 2010 low of 174, according to Bank of America Merrill Lynch data.

High-yield bonds are rated below Baa3 by Moody's Investors Service and BBB- by Standard & Poor's. A basis point is 0.01 percentage points.

Companies sold at least $38.3 billion of bonds in the United States, compared with $21 billion the previous week, according to Bloomberg data. It was the most since the week ended January 5, when $46.6 billion was sold, Bloomberg data show.

Greek plan

Concerns that Greece would struggle to manage its budget deficit led investors to sell risky assets including corporate bonds, pushing junk yields relative to Treasuries to 703 basis points, the widest this year, on February 12.

Spreads tightened and corporate bonds sales increased this month after Greece sold 5 billion euros (Dh25 billion) of bonds and Prime Minister George Papandreou announced a package of tax increases and spending cuts. Greece's financial crisis is over and other European countries will avoid similar problems, former European Commission President Romano Prodi said on Wednesday.

Better US economic data and growing confidence that Greece has solved its problems have boosted investors' appetite for risk, wrote Alan Schankel, head of fixed-income research at Janney Montgomery Scott LLC in Philadelphia.