Deere Sells 30-Year Corporate Bonds at Record Low Yields -- Update

By Sam Goldfarb 

Deere & Co. sold 30-year bonds at a record low yield for U.S. corporate debt of that maturity on Tuesday, seizing on tumbling U.S. Treasury yields to lock in favorable interest rates.

On a busy day for corporate bond issuance, Deere sold 30-year bonds at an initial yield of 2.877%. That broke the previous record of 3.197% that Walt Disney Co. had set when it sold 30-year bonds in July 2016, according to LCD, a unit of S&P Global Market Intelligence.

Deere's bond yield was also a shade lower than the yield on a new 30-year bond that Disney sold Tuesday -- although Disney's bond distinguished itself with a slightly lower coupon rate, having priced at just under 97 cents on the dollar.

Overall, investors expected more than 20 companies to sell bonds Tuesday, as businesses rushed to lock in low rates following a monthlong decline in government bond yields. Those continued to decline after weak manufacturing data added to concerns that a slowdown in global growth is catching up to the U.S.

Helping drag down corporate bond yields, the yield on the benchmark 30-year Treasury settled Tuesday at 1.954%, compared with 1.968% on Friday. That was just above its record low of 1.941% set last week.

The yield on the 10-year note also moved closer to its record closing low of 1.366% -- falling to 1.461% from 1.503% on Friday. The market was closed Monday for Labor Day.

Yields, which fall when bond price rise, dropped sharply after the Institute for Supply Management said its manufacturing index decreased to 49.1 in August from 51.2 in July. That indicated a contraction in the sector for the first time since 2016 and came after other reports showed a decline in factory activity in the U.K., Germany, Japan and South Korea.

Falling Treasury yields are a concern for investors because they are typically associated with declining expectations for economic growth. But they also could provide benefits to the economy by reducing borrowing costs for businesses and consumers.

In recent weeks, the average extra yield, or spread, that investors demand to hold investment-grade corporate bonds versus comparable Treasurys has ticked higher -- rising to 1.21 percentage points from a recent low of 1.07 percentage points in late July, according to Bloomberg Barclays data. Even so, the average yield on such bonds dropped to 2.79% last week -- its lowest level since September 2016, Bloomberg Barclays data also said.

The WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, was recently down around 0.2% at 91.80.

Write to Sam Goldfarb at [e-mail]

(END) Dow Jones Newswires

September 03, 2019 18:03 ET (22:03 GMT)

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