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Shell International Finance sold largest deal of the day on Bond Market

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US High-Grade Corp Bond Market Sees Solid Day Of Supply

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Companies issuing non-guaranteed debt still have to offer steep interest rates to attract investors, however.

Meanwhile, financial institutions are taking advantage of the Federal Deposit Insurance Corp.’s guarantee program, aimed at boosting confidence in the banking system.

“Every day that goes by that you don’t have terrible news, it’s a credit positive,” said William Bellamy, director of fixed income at Thompson, Siegel & Walmsley in Richmond, Va.

Over the past two weeks, financial firms have sold U.S.-dollar denominated guaranteed deals totaling around$46.35 billion, not including Monday’s offerings.

Regions Financial Corp. (RF) on Monday launched a $3.5 billion three-part guaranteed deal, according to an investor looking at it. Meanwhile, American Express Co. (AXP) was marketing a deal backstopped by the FDIC’s Temporary Liquidity Guarantee Program.

“You continue to see decent demand for them,” said Bellamy of the FDIC-backed deals. They have been pricing close to each other, but could tighten if funds that invest in Treasury securities and other U.S. government issues are clearly told they could buy such securities, he said.

On the non-guaranteed side of the market, Shell International Finance, the financing arm of energy giant Royal Dutch Shell PLC (RDSA), sold the largest deal of the day. Its 30-year issue was sold at a risk premium of 325 basis points over Treasurys, according to an investor. Shell is raising funds for general corporate purposes.

Shell doesn’t own any outstanding 30-year debt, but its 10-year bond traded at a risk premium of 237 basis points over Treasurys earlier Monday.

Recently, concessions on new debt have averaged around 100 basis points above comparable Treasury yields.

General Dynamics Corp. (GD) was also in the market with a $1-billion five-year note. Cox Communications was offering 10-year notes in a benchmark deal, which typically means around $1 billion.

But it’s going to take more than a day of healthy supply to overcome the year’s showing. So far, $627.2 billion in U.S.-dollar denominated high-grade bonds have sold, a 22% drop from the same period the previous year, at $806.6 billion, according to data provider Dealogic.

-By Romy Varghese, Dow Jones Newswires; 201-938-4287; [email protected] dowjones.com

-By Kellie Geressy, Dow Jones Newswires; 201-938-2050; [email protected] dowjones.com

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  12-08-08 1506ET
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