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Updated Wednesday, May 5, 2010 3:34 pm TWN, By John Detrixhe Bloomberg

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Junk bond sales set record as investors waver; US$33.7 bil. sold

Companies sold US$33.7 billion of junk bonds in April, a record for the month, with borrowers rushing to issue before investors pull back from the riskiest securities.

Moody's Investors Service says issuance may rise 10 percent this year, while investment-grade sales drop 7 percent. OnCure Holdings Inc., a manager of radiation oncology treatment centers, and American Petroleum Tankers LLC, an affiliate of Blackstone Group LP, are among companies planning to sell high- yield bonds.

While issuance soars and cash streams into the market, yields on speculative-grade debt rose last week relative to government bonds for the first time since the period ended Feb. 26, according to Bank of America Merrill Lynch index data. The rise underscores concern that Europe's growing fiscal crisis and an investigation into Goldman Sachs Group Inc. may slow the economy.

“Companies are trying to come in before the market dries up,” said Kingman Penniman, president of KDP Investment Advisors, a high-yield research firm in Montpelier, Vermont. “It's an issuers' market.”

The extra yield investors demand to own company debt instead of Treasuries rose 6 basis points last week to 149 basis points, or 1.49 percentage points, unchanged from the end of March and down from 176 basis points at the end of last year, Bank of America Merrill Lynch data show. Based on the 8,540 bonds worldwide in the index, yields fell to 3.925 percent from 3.949 percent on April 23.

Junk spreads widened 17 basis points to 561 basis points, after ending March at 584 basis points. Yields rose to 8.29 percent.

Euro ministers agreed to a 110-billion-euro (US$146-billion) rescue package for Greece to prevent a default and stop the crisis spreading. The first payment will be made before Greece's next bond redemption on May 19, Luxembourg's Jean-Claude Juncker said after chairing a meeting in Brussels Sunday.

The European Central Bank said Monday it will accept all Greek government debt as collateral when lending to banks, indefinitely suspending minimum credit-rating thresholds to support the bailout. Greek bonds rose, with the two-year note at the lowest level in a week.

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