CORRECTED-US junk bond sales nearly triple in May to $12 bln
ju4 wa4i dia4n zo1ng he2 ba4o da4o :\n  (Corrects issuance total in 18th paragraph)\nBy Dena Aubin\nNEW YORK, May 30 (Reuters) - U.S. junk bond sales have\nnearly tripled in May to $12.05 billion, in the latest sign\nthat credit markets are healing as fears of recession and\nfinancial meltdowns ease.\nMay's junk bond sales are up from $4.4 billion in April and\nare the highest since October, when $19 billion was sold,\naccording to Thomson Reuters data.\nDespite a still struggling U.S. economy, a string of recent\ndata such as stronger-than-expected durable goods orders on\nWednesday have supported the view that the country may not be\nin a recession.\n"The data, particularly this week, has shown that the\nhousing market is awful but in general the economy is not that\nbad," said Andrew Feltus, portfolio manager for Pioneer\nInvestments' global high-yield fund in Boston. "It's not\ngrowth, we're just sort of limping along, but that's not a\ndisastrous scenario for high-yield."\nA rally in junk bonds has also renewed appetite for new\nissues. Counting interest and price changes, junk bonds posted\ninvestment returns of 0.35 percent in May-to-date and 4.17\npercent in April, reversing a sharp loss in the first three\nmonths of the year, according to Merrill Lynch data.\n"The market is showing it has an appetite for good paper\nand that will continue," said Kingman Penniman, president of\nhigh-yield research firm KDP Investment Advisors in Montpelier,\nVermont.\nJunk bond sales all but came to a halt earlier this year\namid credit turmoil that culminated in the near collapse of\ninvestment bank Bear Stearns in mid-March. Capital-raising by\nbanks, liquidity injections by the Federal Reserve and a\nrebound in stocks have made investors more comfortable taking\nrisk.\nDemand has been especially heavy for bonds in the hot\nenergy sector, where drillers and servicing companies are\nbenefiting from record high oil prices.\nOil and natural gas pipeline company El Paso Corp <EP.N>\nsold $600 million of junk bonds last week while oil and gas\ndriller Plains Exploration and Production Co <PXP.N> sold $400\nmillion, both $100 million more than originally planned.\nOther recent energy deals included $800 million from\nChesapeake Energy Corp <CHK.N> and $250 million from Forest Oil\nCorp <FST.N>.\n"Unlike what we saw in 2007, these are relatively\nhigh-quality, well-known, solid, defensive names," Penniman\nsaid. Preference for safer deals shows investors remain in a\ndefensive mode, he said.\n"They're concerned about the economy, they're concerned\nabout rising default rates and they're concerned that perhaps\nwe haven't seen the last of financial disturbances," he said.\nU.S. junk bond defaults are expected to rise to 4.7 percent\nin the next 12 months from a 25-year low of 0.97 percent at the\nend of 2007, according to Standard & Poor's.\nEven so, with average junk bond yields topping 10 percent,\nthe market is already pricing in a climb in defaults.\n"It's not that tough to argue you're getting compensated\nfor the risk," said Pioneer's Feltus.\nStill, lower-quality borrowers remain all but shut out of\nthe market, especially in hard-hit sectors such as media,\nentertainment, retail, restaurants and consumer products. Those\nsectors combined have sold just five new issues year\nyear-to-date totaling a scant $4.4 billion, according to S&P.\n"These cyclical sectors rely heavily on consumer spending,\nwhich has recently declined after showing resilience in 2007,"\nS&P said in a report on Thursday. Spillover from the housing\nslump has hit home-related consumer sectors, while rising raw\nmaterial costs have further hurt earnings.\nOverall junk bond supply year-to-date remains down 69\npercent from the same period in 2007 at about $22 billion,\naccording to Thomson Reuters data.\n"The significant improvement in markets notwithstanding,\nthere are still signs of a mild credit crunch, especially for\nlower quality borrowers," Lehman Brothers said in a report on\nThursday.\n((dena.aubin@thomsonreuters.com; 1-646-223-6325; Reuters\nMessaging: dena.aubin.reuters.com@reuters.net))\nKeywords: JUNK ISSUANCE/