Bear, Stearns & Co. and FleetBoston Financial Corp. are among nine investment-grade companies planning bond sales totaling $5.2 billion in a flurry of activity after last week's lull.
Investor demand has been strong enough in recent months to narrow the average yield spread between high-quality corporates and 10-year Treasuries. Since Sept. 10, the spread narrowed by 15 basis points, to 132, according to a Merrill Lynch & Co. index.
The pending sales, which include borrowings of $1 billion or more by Textron Financial Corp. and Delta Air Lines Inc., come after two months of relatively slim pickings for investors. Companies sold about $1.6 billion of debt last week, and November's total was only about $22 billion, while October was the slowest month in a year for new sales. New sales averaged about $14 billion a week through August, according Securities Data Co.
As the pace of new sales slowed "tremendously from what we saw earlier in the year," investor demand improved for those companies that came to market, said John Woolway, who helps manage $1 billion of bonds at First Omaha Funds.
Bear Stearns, the sixth-largest U.S. securities firm, plans to sell $500 million of 10-year notes at a yield about 147 to 150 basis points more than 10-year Treasuries. The New York-based firm will likely sell its debt, rated A2 by Moody's Investors Service and A by standard and Poor's, on Thursday.
Investors typically demand higher yields from securities firms than banking companies because earnings in the securities business are more volatile.
Wednesday for example, Bank of New York sold $300 million of 10-year notes, rated the same as Bear Stearns', at a yield 115 basis points more than 10-year Treasuries.
FleetBoston, the eighth-largest U.S. banking company, plans to sell $500 million of 10-year subordinated notes, rated A3 by Moody's and A- by S&P, through Salomon Smith Barney. New England's biggest bank was created when Fleet Financial Group Inc. and BankBoston Corp. merged Oct. 1.
Among the biggest expected sales, Textron Financial is slated to raise $1 billion. The company, a unit of the No. 1 U.S. maker of commercial helicopters and midsize business jets, plans to sell three-year floating-rate notes at a yield in the mid- 30s basis points more than London interbank offered rate. Five- year notes may sell at 110 to 115 basis points over Treasuries.
Textron Financial's senior debt is rated A2 by Moody's and A- by S&P. J.P. Morgan Securities and Merrill Lynch & Co. will manage the sale.
Its parent, Textron Inc., sold $500 million of three-year notes in September at a yield 6.773%, or 103 basis points more than three-year Treasuries.