High-Yield Bonds See Renewed Demand

From Bloomberg News

Texas-based homebuilder D.R. Horton Inc. sold $215 million of notes Friday, tapping a rise in demand for riskier debt with higher yields that made this the busiest week for corporate bond sales since March.

The offering has ratings below investment grade and is one of about nine other so-called junk bond issues, totaling $2.1 billion, that have been completed this week.

El Paso Energy Partners, the republics of Turkey and Pan- ama and AmeriGas Partners also sold below-investment-grade bonds Friday. Pending sales include a $750-million junk bond offering from R.H. Donnelley Corp. to help pay for its purchase of Sprint Corp.'s telephone book unit.

Borrowers are taking advantage of stronger demand from investors willing to take on the risk of holding lower-rated debt in exchange for their higher yields. The demand is underpinned by renewed optimism about the economy, analysts said.


“Folks who have had trillions of dollars sitting in money market accounts and earning almost zero on them are looking for yield,” said Samuel Fuller, chief financial officer of D.R. Horton.

Robust demand for junk securities has driven the yield on the KDP Investment Advisors index of 100 junk bonds to 10.53% now, the lowest since early June and down from a peak of 12.34% in mid-October.

Investors sent $427 million into high-yield bond mutual funds this week, making for six consecutive weeks of inflows totaling more than $3.5 billion, Bear Stearns Cos. said in a report, citing AMG Data Services.