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Simon debuts bonds in Europe as discount to U.S. widens

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Simon Property Group Inc., the largest U.S. mall owner, is debuting euro-denominated bonds as the yield discount to U.S. dollar notes approaches the widest in more than 4-1/2 years.

Simon is selling 750 million euros ($1 billion) of seven-year securities to yield 75 basis points more than swaps, according to a person familiar with the matter. The average yield difference between investment-grade company bonds in euros and comparable dollar notes widened seven basis points in the past week, to 1.22 percent, near the biggest discount since 2008, Bank of America Merrill Lynch indexes show.

While Federal Reserve Chairman Ben S. Bernanke holds off from scaling back stimulus in the U.S., European Central Bank policy makers signaled this week they may provide additional loans to banks to keep borrowing costs low, even amid signs the euro-area economy is strengthening. A report Wednesday shows consumer confidence in Germany improved more than economists predicted.

“The ECB still runs an accommodative monetary policy given the economic challenges the euro zone still faces,” said Rik Den Hartog, a portfolio manager at Kempen Capital Management in Amsterdam. “For Simon, it’s attractive to sell bonds in euros, since yields are at low levels and it offers an opportunity to match their funding better to their European exposure.”

Simon is selling the securities through its Simon Property Group LP unit. Les Morris, a spokesman for the Indianapolis-based company, didn’t immediately respond to an e-mail and phone call seeking comment outside office hours.

Investors demand an average 2.1 percent to hold euro-denominated high-grade notes compared with 3.3 percent for dollar securities, Bank of America Merrill Lynch index data show. The yield premium over swaps for European company debt fell 18 basis points this quarter to 98 basis points, according to the data.

Also in credit markets today, Next Plc, Britain’s second- largest clothing retailer, is selling 250 million pounds ($400 million) of 13-year notes to yield about 150 basis points more than United Kingdom government debt, according to a person familiar with the deal. It’s the Leicester, England-based company’s first bond sale in more than two years, Bloomberg data show.

Daimler AG, the world’s third-biggest luxury automaker, is marketing benchmark-sized bonds in euros maturing April 2020 to yield 55 basis points more than swaps. The Stuttgart, Germany-based carmaker is also issuing at least 300 million euros of three-year floating-rate notes to yield 30 basis points more than the three-month euro interbank offered rate.

In the high-yield market, Italian lender Veneto Banca SCPA is selling euro-denominated notes due January 2016 to yield 4.375 percent to 4.5 percent. The Montebelluna-based bank is rated BB by Standard & Poor’s, two levels below investment grade.

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  1. How much you wanna bet, that 70% of the jobs created there (after construction) are minimum wage? And Harvey is correct, the vast majority of residents in this project will drive to their jobs, and to think otherwise, is like Harvey says, a pipe dream. Someone working at a restaurant or retail store will not be able to afford living there. What ever happened to people who wanted to build buildings, paying for it themselves? Not a fan of these tax deals.

  2. Uh, no GeorgeP. The project is supposed to bring on 1,000 jobs and those people along with the people that will be living in the new residential will be driving to their jobs. The walkable stuff is a pipe dream. Besides, walkable is defined as having all daily necessities within 1/2 mile. That's not the case here. Never will be.

  3. Brad is on to something there. The merger of the Formula E and IndyCar Series would give IndyCar access to International markets and Formula E access the Indianapolis 500, not to mention some other events in the USA. Maybe after 2016 but before the new Dallara is rolled out for 2018. This give IndyCar two more seasons to run the DW12 and Formula E to get charged up, pun intended. Then shock the racing world, pun intended, but making the 101st Indianapolis 500 a stellar, groundbreaking event: The first all-electric Indy 500, and use that platform to promote the future of the sport.

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  5. The Indy Star announced today the appointment of a new Beverage Reporter! So instead of insightful reports on Indy pro sports and Indiana college teams, you now get to read stories about the 432nd new brewery open or some obscure Hoosier winery winning a county fair blue ribbon. Yep, that's the coverage we Star readers crave. Not.

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