Qwest Welcomed by Buoyant Bond Market
The bond market was buoyed by developments on several fronts Tuesday.
* In the junk sector, Qwest Communications International Inc. moved quickly to sell $750 million of high-yield bonds, taking advantage of improving investor demand. It represents the largest sale to brave the junk bond market since Chancellor Media Corp.’s $750-million sale on Sept. 25.
Both companies--which are favorites with investors--benefited from having credit ratings one notch below investment grade.
“We still love Qwest’s bonds,” said Ruth Mulligan, assistant vice president and trader at MFS Asset Management in Boston, which bought the new issue. “We like the fact that it’s a strong name in a very strong sector.”
The fourth-largest U.S. long-distance telephone company sold 10-year notes to yield 7.60%, or 300 basis points more than comparable U.S. Treasuries.
“There’s definitely a better tone to the market now,” said Mark Denkinger, who manages the $63-million Principal High Yield Fund in Des Moines.
A string of companies, including BE Aerospace Inc. and Regal Cinemas Inc., plan to follow Qwest into the market in coming days.
* The municipal market rose amid $3.5 billion in new sales, led by $625 million of revenue bonds from the Houston airport. Even with the market awash in bonds, the airport was able to cut as much as 10 basis points of yield on its new bonds. Most of the day’s other large sales appeared to be in good shape, managers said.
“The calendar has really built up, but most sales went pretty well,” said Beth Howell of Delaware/Voyageur Asset Management.
* Associates Corp. of North America sold $4.8 billion of debt in the second-biggest corporate sale ever, another sign that the concerns that have gripped financial markets are ebbing.
“The psychology in the market changed for the better” since the Federal Reserve Board’s surprise interest rate cut Oct. 15, the second in less than three weeks, said Leonard Lovito of Chase Asset Management.
