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Market Savvy | CONSUMER SAVVY / A briefing for investors

Investors Indicate They're Ready to Bond

October 28, 1998|Times Staff and Wire Reports

Worries about a credit crunch eased a bit further on Tuesday, as several big corporate and municipal borrowers successfully sold huge new bond issues.

That's helping revive the share values of beaten-down junk bond mutual funds and other higher-risk bond portfolios, which were slammed in late September and early October as investors fled all but the safest bonds.

Among Tuesday's bond deals:

* In the corporate junk sector, Qwest Communications International Inc. sold $750 million of high-yield bonds, taking advantage of improving investor demand. That was the largest sale to brave the junk bond market since Chancellor Media Corp.'s $750-million sale on Sept. 25.

Both companies--which have been favorites with stock investors--benefited from having credit ratings just one notch below investment grade.

Qwest, the fourth-largest U.S. long-distance telephone company, sold 10-year notes yielding 7.6%, or about 3 percentage points more than comparable U.S. Treasuries.

"There's definitely a better tone to the [junk] 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 junk market in coming days.

* In the higher-quality corporate bond market, Associates Corp. of North America sold $4.8 billion of debt Tuesday--the second-biggest corporate debt sale ever.

The funding unit of Associates First Capital, the nation's largest publicly traded consumer finance company, boosted its sale by 140%, from the $2 billion originally planned.

Investors were eager to buy the bonds, which included a five-year issue yielding 5.76% and 10-year issue yielding 6.29%.

Those yields compare with U.S. Treasury yields of 4.2% and 4.6%, respectively.

* In the tax-free municipal bond market, $3.5 billion in new bonds were sold, led by $625 million of revenue bonds from Houston's airport. "The calendar has really built up, but most sales went pretty well," said Beth Howell of Delaware/Voyageur Asset Management.

Analysts said investors' willingness to buy bonds again has been boosted by the Federal Reserve Board's two interest rate cuts since Sept. 29. The central bank is trying to pump more money into the financial system to give investors more confidence--and stave off a possible recession in 1999.

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