By Gabrielle Coppola and Pierre Paulden March 2 (Bloomberg) -- Goldman Sachs Group Inc., tapping demand that’s driven borrowing costs near the lowest in almost five years, issued $2 billion of bonds at a yield premium 44 percent less than the last time it sold similar-maturity debt. The 5.375 percent, 10-year notes were priced to yield 5.493 percent, or 190 basis points more than Treasuries, according to data compiled by Bloomberg. The New York-based bank paid a spread of 337.5 basis points, or 3.375 percentage points, in its last 10-year sale in May, the data show. Goldman Sachs, the most profitable securities firm in Wall Street history, came to market as concern that Greece would default faded and the cost to protect against non-payment on U.S. corporate debt fell to the lowest in more than five weeks. U.S. bank costs have declined to 4.861 percent, less than half the level in March 2009, according to a Bank of America Merrill Lynch index. “The sword of Damocles hanging over the corporate bond market is receding, at least temporarily,” said Scott MacDonald, head of credit and economics research at Stamford, Connecticut- based Aladdin Capital Holdings LLC, which oversees $11.9 billion. That’s making it “more favorable to sell debt,” he said in a telephone interview. The extra yield investors demand to own company bonds instead of government debt was little changed as of yesterday from Feb. 26 at 168 basis points, or 1.68 percentage point, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. Yields rose to 4.052 percent, from 4.015 percent at the end of last week, about the lowest since September 2005. Ford Bonds Elsewhere in credit markets, Ford Motor Co. may issue $567 million of bonds backed by payments from auto dealers, known as floorplan debt, according to a person familiar with the offering. The top-rated portion of the debt would be eligible for the Term Asset-Backed Securities Loan Facility, the Federal Reserve’s program to jumpstart credit markets, said the person, who declined to be identified because terms are private. The European Union is selling nine-year bonds in euros, its first note offering in seven months, according to two bankers involved in the transaction. Proceeds will be used to pay the next installments on balance-of-payment loans to Romania and Latvia, the European Commission said in a statement. The number of corporate-bond issuers worldwide facing a possible cut in credit ratings fell 3 percent in February, reaching the lowest level in 16 months, according to a report yesterday by Standard & Poor’s. Anheuser-Busch InBev In the loan market, Anheuser-Busch InBev NV, the world’s biggest brewer, hired 12 banks to arrange $13 billion of debt to refinance borrowings made when the company was formed in 2008, according to a statement yesterday by the lenders. Bond sales to finance Australian infrastructure projects will rise this year as banks set stricter conditions for loans, London-based Fitch Ratings Ltd. said in a report. Syndicated corporate lending in Australia and New Zealand fell to $2.1 billion this year from $4.3 billion in the comparable period of 2009 and $13.7 billion in 2008 as banks conserved capital, Bloomberg data show. U.S. corporate credit risk, as measured by the Markit CDX North America Investment Grade Index of credit-default swaps, fell 3 basis points to 88.4 basis points, according to CMA DataVision. In London, the Markit iTraxx Europe index of 125 companies with investment-grade ratings dropped 1.75 basis point to 83.25, JPMorgan Chase & Co. prices show. Asia Swaps The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 1.5 basis points to 109 basis points as of 8:17 a.m. in Hong Kong, according to Citigroup Inc. Credit swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting $10 million of debt. Emerging-market spreads narrowed 8 basis points to 284 basis points, the lowest since Jan. 19, according to JPMorgan’s EMBI+ Index. The spread has widened from 263 basis points on Jan. 11, then an 18-month low. Greek bonds rose as European Union Commissioner Olli Rehn demanded the country outline new ways to cut its deficit, stoking speculation the region is close to an agreement on an aid package. The yield on the two-year Greek note fell 36 basis points to 5.711 percent yesterday. The extra yield investors demand to own the bonds instead of similar-maturity German bunds narrowed to 480 basis points from 515 basis points on Feb. 26, Bloomberg data show. Credit swaps protecting against a default by Greece fell 23 basis points to 341 basis points, CMA prices show. Access to Credit Goldman Sachs sold notes as U.S. banks seek to replace $309 billion of government-guaranteed debt with longer-dated maturities. The bank had $20.8 billion of senior unsecured debt guaranteed by the Federal Deposit Insurance Corp. in December, according to a filing yesterday with the U.S. Securities and Exchange Commission. Goldman Sachs was the first bank to use the Temporary Liquidity Guarantee Program, which provided access to credit markets after the collapse of Lehman Brothers Holdings Inc. in September 2008. It backs the debt with FDIC guarantees. “It’s good for them because they want to lock up longer- term financing,” said Jason Brady, who oversees $8 billion in fixed-income assets at Santa Fe, New Mexico-based Thornburg Investment Management Inc. “They’re terming out their liability structure versus the TLGP stuff, which was shorter.” Goldman Bonds Goldman Sachs’s weighted average maturity of its unsecured long-term borrowings as of December was about seven years, according to the filing. Michael DuVally, a company spokesman, declined to comment on the sale. Goldman Sachs sold $2 billion of 7.5 percent, 10-year debt in January 2009 at a spread of 500 basis points. Four months later, in the reopening, the company issued $1 billion of the debt, Bloomberg data show. The senior unsecured notes traded at 114.452 cents on the dollar to yield 5.438 percent, or 182.7 basis points more than benchmark securities, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. To contact the reporters on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.netPierre Paulden in New York at ppaulden@bloomberg.net;

Source