US bonds slide on Greece deficit

New York: US corporate bond issuance fell 76.9 per cent to the least in six weeks as credit markets were roiled by uncertainty stemming from Greece's budget deficit.

Borrowers sold $7.78 billion (Dh28.5 billion) of debt last week, down from $33.6 billion the previous period when companies tapped the market to fund mergers, according to data compiled by Bloomberg.

Pipeline operator Sunoco Logistics Partners LP issued $500 million of notes and Huntsville, Alabama-based telephone-service provider ITCDeltacom Inc. cancelled its sale, citing market conditions.

Issuance declined and bond prices fell as the marketplace reassessed risk taken on during last year's record corporate bond rally, said James Barnes, portfolio manager at Wyomissing, Pennsylvania-based National Penn Investors Trust Co. Including high-yield, high-risk debt, borrowers have issued $157.1 billion in 2010, compared with $184.4 billion last year.

"Anytime you have uncertainty in the marketplace, in this case driven by Greece, you have investors as well as institutions step to the sidelines," said Barnes, who helps oversee about $1 billion of fixed-income assets. "I think a lot of institutions took care of their funding in 2009, so we're expecting to have a drop off in issuance."

The extra yield investors demand to own corporate debt jumped 6 basis points to 297, the highest since December 16, according to Bank of America Merrill Lynch index data. Investment-grade bond spreads widened 3 basis points to 191, the widest since December 29, according to Bank of America Merrill Lynch's US Corporate Master index. Yields rose 17 basis points to 4.7 per cent. One basis point is 0.01 percentage point.

Greece budget

European leaders ordered Greece to get the bloc's highest budget deficit under control and said they were prepared to take "determined" action to staunch the worst crisis in the euro currency's 11-year history.

The European Union summit accord stopped short of offering concrete measures to help Greece handle a debt load that exceeds its annual economic output.

"It is certainly possible that those problems will widen and ultimately lead to a slowdown or even a reversal of the US economic recovery," Martin Fridson, chief executive officer of money-management firm Fridson Investment Advisors in New York, wrote in an email.

The offering from Sun-oco Logistics of Philadelphia was split evenly between bonds due in 10- and 30-years, Bloomberg data show. The 5.5 per cent 10-year notes paid a spread of 190 basis points, and the 6.85 per cent 30-year bonds paid 230 basis points.

ITC Deltacom cancelled its offering of senior secured notes, citing "current market conditions," according to a statement distributed February 10 by PR Newswire. The company had planned to sell $325 million of notes.

The telecommunications company joins Energy Transfer Equity LP, New World Resources NV, Regent Seven Seas Cruises UK Ltd. and Songa Offshore SE as borrowers who have postponed debt sales in the past three weeks. All but Songa cited market conditions.

Debt funds