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Investors demand higher bond yields

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From Bloomberg News

In another sign of renewed stress in the credit markets, corporate borrowers are pulling back from bond sales because investors are demanding higher interest rates.

Country Garden Holdings Co. and South Korea’s Hyundai Capital Services Inc. were among six global borrowers that delayed at least $3.5 billion in sales of U.S. corporate bonds in the last two days.

Country Garden, China’s most profitable builder, failed to attract investors for its proposed sale of $1.5 billion in notes even after offering yields of as much as 10%, according to people familiar with the deal, who declined to be identified because no announcement had been made.

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Hyundai Capital, South Korea’s biggest auto-finance company, had sought to raise at least $500 million in five-year notes.

“The elements for a good deal are not all in place right now for them, with [interest rate] spreads as wide as they are now,” said Andrew Kemp, director of fixed income at DBS Asset Management in Singapore. “Investors are cautious of taking new credit positions” amid continued turmoil in credit markets, he said.

Westlake Village-based Guitar Center Inc., the largest U.S. retailer of musical instruments, on Wednesday postponed a planned $750-million bond sale.

The average annualized yield on an index of corporate junk bonds tracked by KDP Investment Advisors rose to 8.27% on Thursday, up from 8.21% on Wednesday and the highest since Sept. 17.

The yield has surged from 7.69% on Oct. 12 as investors have become less willing to take on risk without being paid more to do so.

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