CREDIT MARKETS: Healthy High-Grade, Asset-Backed Issuance

NEW YORK(Dow Jones)--New note issuance reached robust levels for August in a couple of credit-market sectors Tuesday, particularly high-grade corporates and asset-backed securities.

Investment-grade issuance got a boost as earnings blackout periods expired, while asset-backed volume picked up ahead of a key deadline for government backing of new deals.

Credit markets digested some mixed June economic data on the day, as personal income saw the sharpest drop in four years during June while pending home sales climbed for a fifth straight month, offering a sign of improvement for housing and the overall economy.

"All these deals are being gobbled up," said Greg Habeeb, head of taxable fixed income at Calvert Asset Management.

General Electric Capital Corp., the finance arm of industrial conglomerate General Electric (GE), offered $2 billion in non-guaranteed 10-year notes. On July 22, GE said the Federal Deposit Insurance Corp. approved its exit from the guarantee program.

"The offering supports the funding plan we presented in our GE Capital investor meeting last week," said GE spokesman Russell Wilkerson in an email.

Bank of America, Barclays Capital, Deutsche Bank and RBS Greenwich Capital were underwriters.

GECC remains the biggest borrower under the FDIC program, having issued $50.7 billion of debt excluding commercial paper. It has sold only $6.9 billion without the backing, excluding Tuesday's issue, according to Dealogic.

Dow Chemical (DOW) offered $2.5 billion in notes maturing in 2012 and 2015. The deal includes protective provisions, including change of control compensation and coupon steps. The proceeds will go toward repaying a portion of borrowings under the term loan that financed the company's merger with Rohm & Haas. Underwriters were Barclays Capital, Citigroup, HSBC and Morgan Stanley.

FirstEnergy Corp. (FE) offered $1.5 billion in three parts, and Coca-Cola $250 million 10-year notes. The deals saw risk premiums at the lower end of guidance, a sign of strong demand.

As bond yields fall and after stock returns outperformed bonds in July, analysts from both Bank of America Merrill Lynch and JP Morgan expect investors to turn to stocks rather than debt.

"This is not a negative for credit but a logical step in the economic cycle as investors seek out higher yields," wrote JP Morgan analysts, adding that yields would likely stabilize even as stock prices rise.