By Sapna Maheshwari and John Detrixhe Dec. 11 (Bloomberg) -- BlackRock Inc., the world’s largest asset manager, and Time Warner Cable Inc. led a 75 percent surge in U.S. corporate bond offerings this week as issuers took advantage of the cheapest relative borrowing costs in almost two years to refinance debt. Sales of $22 billion compare with $12.6 billion last week, according to data compiled by Bloomberg. New York-based BlackRock issued $2.5 billion of debentures to repay commercial paper in its first bond sale in two years. Time Warner Cable, also located in New York, sold $2 billion of notes as the second-biggest U.S. cable television-operator raised cash to reduce bank debt and commercial paper. The jump in sales came as Fitch Ratings said default rates in the U.S. will range from 6 percent to 7 percent next year, half the amount forecast for 2009. Evidence that an improving economy is bolstering the ability of borrowers to repay debt is encouraging investors to lend money at lower interest rates. “You’ve got definite signs of an improving economy, so the fundamentals in terms of company-specific credit metrics are improving,” said Mitchell Stapley, chief fixed-income officer for Grand Rapids, Michigan-based Fifth Third Asset Management Inc., which oversees $19 billion. “Even after the monster rally you’ve had in bonds, they’re still giving you a decent” yield over Treasuries, he said. Shrinking Spreads The extra yield investors demand to own company bonds instead of government securities narrowed to 3.13 percentage points yesterday, down from 3.29 percentage points at the start of the month and the lowest since Dec. 20, 2007, according to Merrill Lynch & Co.’s U.S. Corporate & High Yield Master index. The spread has shrunk from the high this year of 8.09 percentage points in March, representing annual interest savings of $50 million on every $1 billion borrowed. The Labor Department said yesterday that the four-week average of jobless claims declined to a one-year low of 473,750 last week from 481,500. A survey released earlier in the week by the Institute for Supply Management in Tempe, Arizona, showed manufacturers in the U.S. have a more optimistic outlook for sales in 2010 than their service industry counterparts. Even as the economy shows signs of improving, investors are betting the Federal Reserve will maintain its target rate for overnight loans between banks in a range of zero to 0.25 percent after Chairman Ben Bernanke said in a Dec. 7 speech that inflation “could move lower.” A lower rate of inflation bolsters the value of a bond’s fixed-interest payments. Relative Yields Yields on investment-grade bonds relative to benchmark Treasuries narrowed five basis points this week to 2.10 percentage points as of yesterday, Merrill Lynch indexes show. High-yield, high-risk spreads contracted six basis points to 7.18 percentage points. High-yield, or junk, bonds are rated below Baa3 by Moody’s Investors Service and BBB- at Standard & Poor’s. Investment-grade companies sold $16.4 billion of debt this week, compared with $10.8 billion in the period ended Dec. 4. Junk bond offerings climbed to $5.6 billion from $1.78 billion. Overall, $1.2 trillion of debt has been issued in the U.S. corporate bond market this year, a 46 percent increase from the same period in 2008. BlackRock raised $500 million of three-year 2.25 percent notes that priced to yield 110 basis points more than similar- maturity Treasuries, $1 billion of five-year 3.5 percent debt that paid a spread of 135 basis points and $1 billion of 10-year 5 percent bonds at a spread of 160 basis points, Bloomberg data show. A basis point is 0.01 percentage point. ‘Lot of Opportunities’ “There are a lot of opportunities in the market in certain areas, particularly with the government’s Treasury-supported TARP toxic-asset investment programs, so it’s good to see an asset manager issuing debt and probably using part of that to invest in a toxic-asset program,” said Guy Lebas, chief fixed- income strategist an economist at Janney Montgomery Scott LLC in Philadelphia. “The success of this BlackRock offering could stimulate some additional interest.” BlackRock’s issue followed a $250 million sale by Oaktree Capital Management LLC last month, and a $600 million issue in August by Blackstone Group LP, the world’s largest buyout company. Time Warner Cable’s $2 billion sale was split between $500 million of 3.5 percent notes due in 2015 and $1.5 billion of 5 percent 10-year notes, Bloomberg data show. Ford Motor Credit Junk-rated Ford Motor Credit Co. issued $750 million of 8.125 percent senior unsecured 10-year notes on Dec. 7, its fourth debt sale this year. The finance arm of Dearborn, Michigan-based Ford Motor Co. has borrowed $4.6 billion in 2009, according to Bloomberg data. Proceeds may be used for loans, to retire debt or to buy receivables, Ford said in a Securities & Exchange Commission filing. “The new-issue calendar will continue to be pretty active in high-yield,” said Mark Durbiano, who manages about $4 billion in junk debt at Federated Investors Inc. in Pittsburgh. “It’s important to note that most of, not all, most of the uses of proceeds is simply to refinance other debt, and I think that’s a trend we’ll continue to see.” At least 11 high-yield companies are planning debt offerings of $400 million or less, Bloomberg data show. Among companies seeking to issue debt is McJunkin Red Man Corp. The Charleston, West Virginia-based distributor of pipes, valves and fittings, which was purchased by Goldman Sachs Capital Partners in 2007, plans to sell $1 billion of senior secured notes due in 2016. To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.netJohn Detrixhe in New York at jdetrixhe@bloomberg.net

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