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Corporate bond sales hit August record

JP Morgan Chase

Sales of corporate bonds globally surged to the most on record for August as issuers rushed to lock in record-low borrowing costs.

Siemens AG, Europe’s largest engineering company, and J.P. Morgan Chase & Co. led borrowers selling $237.6 billion of debt this month, exceeding the $235.3 billion raised in August 2010, according to data compiled by Bloomberg. Yields fell to an unprecedented low of 3.72% on Aug. 28, according to Bank of America Merrill Lynch index data.

Offerings are increasing as issuers take advantage of demand with default rates below historic averages and optimism rising that Europe’s leaders may contain the region’s fiscal strains.

While yields on corporate bonds average less than 4%, the spread to U.S. Treasuries is higher than before the credit crisis. Government bond yields have been suppressed by central banks easing monetary policy to stimulate growth.

Sales in the U.S. reached $94.6 billion, split between $63.9 billion in investment-grade debt and $30.7 billion in high-yield, while issuance in Europe totaled €33.6 billion ($42 billion), Bloomberg data show.

Siemens sold $3.3 billion of bonds denominated in pounds and euros Wednesday in Europe’s biggest corporate fundraising since May, the data show. The Munich-based company’s offering included £350 million ($553 million) of 2.75%, 13-year debt and £650 million of 3.75%, 30-year securities, Bloomberg data show.

J.P. Morgan sold $2.5 billion of 2%, five-year bonds on Aug. 13 and $1.1 billion of 5.5%, perpetual preferred shares on Aug. 20, Bloomberg data show. The New York-based bank’s offering of shares, rated the highest level of speculative grade at Ba1 by Moody’s Investors Service, was increased from an initial $500 million amid demand from investors.