Feb. 13 (Bloomberg) -- Siemens AG, Europe’s largest engineering company, and Imperial Tobacco Group Plc led 22.1 billion euros ($28.5 billion) of corporate bond sales in Europe this week.
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By Shelley Smith and Andrew Reierson


Sales held above the weekly average of 14.8 billion euros for the past year, though issuance was down from last week’s 28 billion euros, according to data compiled by Bloomberg. Munich- based Siemens raised 4 billion euros yesterday in the biggest bond sale by a non-financial company this year, while Imperial Tobacco sold 1.5 billion euros of notes.

Companies are tapping investor demand for corporate debt. Investors are attracted to the bonds because investment-grade yields relative to government securities have tripled in the past 12 months, according to Merrill Lynch & Co. indexes. Borrowers sold 195 billion euros of bonds this year, more than double the amount in the year-earlier period, Bloomberg data show.

“The only buyer in town is the cash buyer, in for simple plain-vanilla product that has a decent rating, offers good returns and extremely low default risk,” Suki Mann, a credit strategist at Societe Generale SA in London, wrote in a note to investors.

The extra yield investors demand to hold high-grade company bonds rather than government debt widened 2 basis points to 4.09 percentage points this week, according to Merrill Lynch’s Investment-Grade Corporate Bond index. The index narrowed 19 basis points this year as demand for company debt increased.

Siemens Oversubscribed

Siemens issued 2 billion euros of 4.125 percent bonds due 2013 at a yield of 158 basis points more than the benchmark mid- swap rate, Bloomberg data show. The engineering company also raised 2 billion euros from eight-year notes priced at a spread of 200 basis points. A basis point is 0.01 percentage point.

Orders for Siemens’s bonds reached 20 billion euros, Chief Financial Officer Joe Kaeser said today on a conference call. The demand allowed Siemens to cut the extra yield it offered buyers from an initial spread of 170 basis points on the four-year debt and 210 basis points on the eight-year notes, people involved in the deal said.

Imperial Tobacco, the maker of West and John Player Special cigarettes, sold 1.5 billion euros of seven-year notes on Feb. 10 at a spread of 510 basis points over the mid-swap rate. The Bristol, England-based company also raised 1 billion pounds ($1.5 billion) from 13-year bonds priced to yield 485 basis points more than similar-maturity U.K. government debt.

Other bond sales this week included companies increasing the size of existing issues.

Vodafone Plc, the world’s largest mobile-phone company, added 325 million pounds to its 4.625 percent bonds due September 2014. The Newbury, England-based company priced the bonds at 200 basis points over U.K. government debt.

Bayerische Motoren Werke AG, the biggest luxury carmaker, added 500 million euros to its sale of 8.875 percent bonds due in 2013. The new notes were priced to yield 390 basis points more than the benchmark mid-swap rate, according to data compiled by Bloomberg.

To contact the reporter on this story: Shelley Smith in London at ssmith118@bloomberg.net