By Bryan Keogh and Sonja Cheung June 21 (Bloomberg) -- Corporate bond sales are back to levels not seen since April as interest-rate swap spreads show investors are gaining confidence that Europe’s debt crisis is contained. Total SA, Europe’s third-largest oil producer, and Petah Tikvah, Israel-based Teva Pharmaceutical Industries Ltd. led $36.1 billion of global sales last week, the most since the period ended April 23, according to data compiled by Bloomberg. Even the riskiest debt is staging a comeback, with cognac maker Remy Cointreau SA raising 205 million euros ($255 million) of debt in the first European junk bond offering in a month. Markets are moving past concern that the euro region’s struggle with budget deficits will undermine the global economic recovery and make it harder for borrowers to meet debt payments. Since April 1, equity analysts have boosted their second-quarter earnings estimates for companies in the Standard & Poor’s 500 Index to $19.72 per share from $19.11, according to JPMorgan Chase & Co. “We could see further issuance in the next month if the overall tone of the market stays positive,” said Felix Freund, a money manager at Frankfurt-based Union Investment GmbH who helps oversee 160 billion euros. Investors put $164 million in high-yield bond funds in the week ended June 16 after withdrawing $6.27 billion in the five previous periods, according to EPFR Global, a Cambridge, Massachusetts-based research firm that tracks asset allocations. ‘Improved Tone’ “It’s a confirmation of the improved tone we’ve seen over the last few days,” said Martin Fridson, a global credit strategist at BNP Paribas Asset Management in New York. “It looks like some deals that had been talked about but put on the back-burner will start to re-emerge.” One measure of investor fear, two-year interest-rate swap spreads, fell last week to 34.13 basis points, the narrowest since May 13 and down from 52.25 on May 24. Swap spreads reflect the difference between the rate to exchange floating for fixed interest payments and Treasury yields for two years. Elsewhere in credit markets, the extra yield investors demand to own corporate bonds rather than government debt shrank last week for the first time since the period ended May 14, credit-default swaps tied to U.S. and European corporate bonds dropped and prices of leveraged loans reversed a monthlong decline. Auto-Loan Bonds Ally Bank, part of GMAC Inc., and Banco Santander SA sold $1.95 billion of bonds derived from auto loans as the asset- backed debt market also showed signs of a revival. Emerging- market bonds rallied. Yield spreads for company bonds globally ended last week at an average 196 basis points, or 1.96 percentage points, down from 201 on June 11, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. The yield on the index, which tracks 8,516 issues, is 4.1 percent. “It’s likely that spreads will grind tighter on more days than not,” JPMorgan credit strategists led by Eric Beinstein said in a report dated June 18. “But the list of risks isn’t diminishing.” Returns on corporate bonds as measured by the Bank of America index average 0.19 percent this month, after losing 0.4 percent in May. The year-to-date return is 3.82 percent, compared with a loss of 3.13 percent for the MSCI World Index of stocks. Credit-Default Swaps The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or speculate on creditworthiness, declined 14 basis points last week to 110 basis points as of June 18, the lowest since May 18, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of swaps on 125 companies with investment-grade ratings fell 12.7 basis points to 117.17, the lowest in more than three weeks. Today, the Markit iTraxx Asia index slumped 10 basis points and the Markit iTraxx Australia index dropped 12 basis points, according to Royal Bank of Scotland Group Plc and Nomura Holdings Inc. prices. The indexes typically fall as investor confidence improves and rise as it deteriorates. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt. Leveraged Loans The S&P/LSTA US Leveraged Loan 100 Index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, rose 0.57 cent to 88.79 cents on the dollar last week. The index has lost 3.2 percent this quarter after gaining 4.7 percent in the first three months. The asset-backed bond sales from Ally Bank, a Midvale, Utah-based unit of GMAC, and Spain’s Banco Santander -- both of which were boosted in size -- came two days after Bank of America Corp. of Charlotte, North Carolina, sold $1.25 billion of the securities. The largest, top-rated portion of Ally’s sale, a $448 million slice maturing in about 2.2 years, yields 25 basis points more than the benchmark swap rate, said a person familiar with the offering who declined to be identified because the terms aren’t public. The issue was increased from $792.3 million. The highest-rated portion of Banco Santander’s $750.4 million deal matures in about 2 1/4 years and yields 68 basis points over swaps. Last week’s asset-backed sales compare with $7 billion in all of May and $3.2 billion in April, Bloomberg data show. ‘Sentiment Improved’ “Sentiment has improved over prior weeks,” said Chris Sullivan, chief investment officer at the United Nations Federal Credit Union in New York. “Spreads have managed to retrace some of their earlier widening, but I think further improvement from here will be conditional on a relatively stable interest-rate environment and fundamentals still supportive of credit.” The corporate bond market is gaining strength after sales slumped in May to the slowest since 2003. Issuance collapsed as investors grew concerned that budget deficits in Greece, Portugal, Ireland, Italy and Spain would escalate into a credit crisis reminiscent of the subprime-mortgage meltdown that pushed Lehman Brothers Holdings Inc. into bankruptcy in 2008. Spain’s successful 3.5 billion-euro bond auction and European policy makers’ pledge to publish stress tests to boost transparency in the financial industry sparked rallies in stocks and bonds last week. Markets Rally The euro strengthened 2.3 percent to $1.2388 as of June 18, paring its 13.5 percent decline this year. European Union leaders agreed to disclose how banks perform on stress tests, seeking to show investors that the financial system can withstand shocks. “Risk appetite is slowly on the rise for all the various risky asset classes, from equities to credit, and even the euro,” said Suki Mann, head of Societe Generale SA’s credit strategy group in London, who recommends investors buy corporate debt. “The primary market remains the preferred re-entry point” for investors, he said. Total raised $2.5 billion in its biggest offering in dollars, Bloomberg data show. The sale was split evenly between 3 percent notes due in 2015 that yield 110 basis points more than Treasuries and 4.45 percent bonds due in 2020 that pay a spread of 130 basis points. Paris-based Total sold the notes through its Total Capital SA unit. BP Plc, embroiled in controversy over the worst oil leak in U.S. history, and Royal Dutch Shell Plc are the two biggest European energy companies by sales. Teva Bonds Teva, the world’s biggest generic-drug maker, sold $2.5 billion of debt in a three-part sale, Bloomberg data show. The offering consisted of 18-month floating-rate notes and two- and five-year fixed-rate debt. Proceeds will be used to repay debt from the 2008 acquisition of Barr Pharmaceuticals Inc. and to help finance the purchase of Ratiopharm GmbH, Teva said in a filing with the U.S. Securities and Exchange Commission. U.S. corporate bond issuance rose 66 percent to $15.6 billion last week, the most in seven weeks, and sales in Europe climbed to 10.3 billion euros from 8.4 billion euros, Bloomberg data show. “Issuance may pick up, even if it’s nothing near what we had in March and April,” said Sabur Moini, who manages $1.3 billion of high-yield debt at Payden & Rygel in Los Angeles. “People are getting more comfortable that southern Europe isn’t going to implode and maybe things aren’t as bad as people thought in mid-May.” Remy Cointreau Remy Cointreau, the maker of Remy Martin cognac and Bols liqueur, ended a one-month drought of junk bond issuance in Europe to sell 205 million euros of six-year bonds at a yield of 5.18 percent, Bloomberg data show. The company said it planned to use proceeds from its first sale in more than four years to fund a tender offer for outstanding notes. High-yield, or junk, bonds are rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. Remy’s new notes climbed 0.66 cent to 98.4 cents on the dollar just after they were issued, according to HSBC Holdings Plc prices on Bloomberg. To contact the reporters on this story: Bryan Keogh in London at bkeogh4@bloomberg.net; Sonja Cheung in London scheung58@bloomberg.net

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