Global Capital Markets
Cisco Systems and U.S. wireless carrier Clearwire led $96.9 billion of bond sales this month, the busiest November since 2006, as companies took advantage of near-zero interest rates.
U.S. corporate bond sales reached an annual record of $1.171 trillion as borrowers took advantage of low interest rates and surging demand for debt securities following last year’s credit freeze. Sales of investment-grade and high-yield, high risk debt compare with the more than $1.167 trillion that companies sold in all of 2007, the previous record. Last year, the total was $874 billion.
Companies sold a record $385.9 billion in the first quarter of this year as borrowers accessed the thawing credit markets. Corporate issuance was $331.9 billion in the second quarter and $268.4 billion in the third quarter.
Volkswagen and Vivendi led a more than three-fold increase in non-financial bond sales this week as companies rushed to take advantage of the lowest yields in four years.
China’s finance ministry completed its first sale of 50-year debt at a lower-than-expected yield as brokerages said life insurers purchased the securities.
U.S. Treasuries
Treasuries advanced the most this month after a proposal from Dubai to delay debt payments set off a slide in stocks and higher-yielding assets worldwide.
The Treasury sold $44 billion of two-year notes at a yield of 0.802 percent, the lowest on record, as demand for the safety of U.S. government securities surges going into year-end.
Swaps
Interest-rate swap spreads widened after Dubai’s attempt to reschedule its debt payments rattled investors and reduced demand for higher-yielding assets.
The difference between the rate to exchange floating- for fixed-interest payments and U.S. Treasury yields for two years, known as the two-year swap spread, widened 3.94 basis points to 33.19 basis points. Swap spreads are based in part on expectations for the London interbank offered rate, or Libor, and are used as a gauge of investor perceptions of credit risk.
Commercial Paper Update
The U.S. CP market contracted in the latest week, Federal Reserve data showed on Friday. It was the third weekly contraction in four weeks. For the week ended Wednesday Nov. 25, the size of the U.S. CP market fell by $10.7 billion to $1.257 trillion outstanding.
LIBOR
The cost of borrowing between banks fell. The British Bankers’ Association said the rate on three-month loans in dollars, the London Interbank Offered Rate, or Libor, fell to 0.2556 percent from 0.2606 percent
Money Market Funds
A group of investors including Ameriprise Financial Inc. won a victory when a federal judge ordered the Reserve Primary Fund to distribute its assets equally among all shareholders.
Central Banks
Russia’s central bank cut its key interest rates to a record low in the ninth reduction since April.
Hungary’s central bank cut its benchmark interest rate to the lowest in more than three years today to speed the country’s recovery from its worst recession in 18 years, which helped slow inflation.
Vietnam raised the benchmark interest rate to 8 percent, the first increase since January, and narrowed the dong’s trading band to 3 percent from 5 percent.
Banking
U.S. “problem” lenders climbed to the most in 16 years and the Federal Deposit Insurance Corp.’s fund protecting customers against bank failures slipped into a deficit in the third quarter, the agency said.
Credit Ratings
Mexico’s investment-grade credit rating was lowered by Fitch. Fitch cut Mexico’s foreign debt rating one level to BBB, the second-lowest investment grade and in line with countries including Russia and Thailand, and changed the outlook to stable from negative. The downgrade was the first by Fitch since it gave Mexico an initial rating of BB in 1995 and the first by any ratings company since S&P cut it in the wake of the 1994 peso devaluation.
Los Angeles, the largest city in California by population, had its credit rating lowered on $2.94 billion of debt by Fitch, which said the city’s deficit next year will exceed 9 percent of revenue. Fitch said in a statement it lowered ratings to AA- from AA on $1.5 billon of general obligation bonds and to A+ from AA- on $1 billon of the city’s certificates of participation, or municipal bonds backed by the general fund, $25 million of judgment obligation bonds and $419.7 million of debt sold for the Los Angeles Convention and Exhibition Center Authority.
Rating Agencies
Connecticut plans to join Ohio in suing credit-rating companies for “negligent, reckless and incompetent work” in grading debt purchased by state pension funds.
M&A
Reliance Industries made a cash offer to buy a controlling stake in closely held LyondellBasell Industries AF, the bankrupt chemicals and fuels maker.
Windstream Corp., the rural U.S. home-phone carrier, agreed to buy Iowa Telecommunications Services Inc. for about $530 million in cash and stock to expand into Iowa and Minnesota.
CDS
Dubai’s attempts to delay debt repayments spurred an increase in the cost of insuring government and company bonds from default around the world and may curb lending throughout the Persian Gulf. The cost to protect U.S. corporate bonds from default rose to the highest in almost a month.
Currencies
The dollar dropped to a 14-year low against the yen.
Commodities
Gold climbed to the highest price ever, capping the longest rally in 27 years, as the dollar’s slump deepened and on a report that India’s central bank may add to last month’s 200 metric-ton purchase. Gold reached a record $1,189 an ounce and has rallied 13 percent since Nov. 2, after India said it bought bullion from the International Monetary Fund.
