This Week in Corporate Finance (08/10/12)

 This week was a pleasant change of pace as we experienced an old-fashioned, steady-as-she-goes, no-news-is-good-news kind of week. We witnessed a few hints that the worst-of-the-worst may be behind us and that our forward trajectory may be on the ascent. Both here and abroad, money moved from safety to risk, as chasing incremental yield became the focus of the week.

Here in the US, the 2-year Treasury note yield was up to 2bps to 26bps; the 5-year note was up 4bps to 70bps; the 10-year note was up 10bps to 1.66%; and the 30-year bond was up 10bps to 2.74%.

In Germany and France, there was still a bit of a flight-to-safety as the European economy looks to be fragile at best. The 30-year Bund yield was -2bps lower to 2.23%; the 10-year Bund was -3bps lower to 1.39%; and the 2-year Bund continues to float in negative territory, falling -5bps to negative -7.4bps. The French 10-year Oat was -3bps lower at 2.08%.

Spain continues to dance on the razor’s edge. This week their 10-year bond yield was up 6bps to 6.91%, dangerously close to the optically important seven percent, while Italy experienced a nice little rally this week as the yield on its 10-year bond fell -15bps to back under six percent at 5.90%.

The situations in Greece and Portugal continue to improve. The Greek 10-year note yield was -95bps lower this week to 24.36%, the lowest yield since mid-May and the Portuguese 10-year yield was lower by a similar -100bps to 9.98%, the first time the yield has been lower than ten percent since late June.

With interest rates continuing to hover near historical lows, corporations continue to bring bond-deals to the market, where there continues to be plenty of investor appetite. Altria lead the pack with their $2.8 billion two-tiered transaction consisting of $1.9 billion of a 10-year note and $900 million of a 30-year bond; PepsiCo raised $2.5 billion in a three-tranche sale comprised of $900 million of a 3-year note, $1 billion of a 5-year note, and $600 million of a 30-year bond; Community Health Systems raised $1.6 billion with a six-year security; Celgene raised $1.5 billion in a two-part deal made-up of $500 million of a 5-year note and $1 billion of a 10-year note; and Sprint issued $1.5 billion of an 8-year note. This was the busiest week for corporate bond issuance since March.

In the US, the equity indexes all finished the week higher with the Dow up over 100 points to close at 13,207.95; the NASDAQ settled back over 3K at 3,020.86; and the S&P 500 crossed back over 1,400 to finish the week at 1405.87.

Equity markets in Europe were up over one percent this week, with the FTSE closing at 5,847.11; the CAC settling at 3.435.62; and the DAX making a run at 7K, finishing the week at 6,944.56.

On the commodity front, gold was up slightly this week to finish at $1,619.70/oz, oil was up nearly $2 to finish at $93.25/barrel, and corn reached an all-time high of $8.2957/bushel.

Maybe we shall have two relatively quiet weeks in a row…….