Feb. 8 (Bloomberg) — Corporate borrowing costs are rising at the fastest pace in more than two months on concern that worsening government finances will slow the global economy and make it harder for companies to meet debt payments.
The extra yield investors demand to own corporate bonds instead of government securities widened 4 basis points last week to 169 basis points, the most since the period ended Nov. 27, according to the Bank of America Merrill Lynch Global Broad Market Corporate Index. Spreads widened for three weeks, the longest stretch in about a year, while those for U.S. high- yield, high-risk companies expanded by the most since August.
Optimism over the recovering economy that made January the best start to a year since 2001 for the corporate bond market is fading as finances in Greece, Spain and Portugal deteriorate, Japan struggles to emerge from recession and concerns grow that emerging-market valuations are too high. BES Investimento do Brasil pulled an international bond offering of as much as $350 million, capping a week of canceled sales from India to Korea.
“The potential impact of spill-over into other markets has gotten folks to look at risk assets of all types, and you’re seeing a pullback across the globe,” said Andrew Karp, a managing director on Bank of America Corp.’s investment-grade syndicate desk in New York.
By Sapna Maheshwari and John Detrixhe
