Euro corporate bond sales flower in May

By Maya Thatcher

LONDON, May 15 (Reuters) - Non-financial corporate euro bond issuance is powering on for the second consecutive month, as both lenders and borrowers are enticed back to new deals by steadying debt market conditions.

More than 11 billion euros ($17.1 billion) of bonds from borrowers such as German premium carmaker BMW (BMWG.DE: Quote, Profile, Research), France Telecom (FTE.PA: Quote, Profile, Research) and Britain's National Grid Gas (NG.L: Quote, Profile, Research) have been sold so far this month, according to data from Societe Generale.

Adding to the mix, Uranian enrichment services firm Urenco priced a 500 million euro seven-year bond on Thursday at mid-swaps plus 90 basis points.

If the second half of the month proves as strong as the first, May will be the heaviest month for issuance in 2008, and could match or surpass the borrowing boom years of 2001 and 2002, when issuance topped 20 billion euros.

Issuance tends to beget further issuance, and credit strategists and bond syndicate managers agree that markets should be braced for more -- although uncertainty over the path of the global economy could yet slow activity.

"There's more to come, the demand is there and the performance is good," Societe Generale credit strategist Suki Mann wrote in a note to clients. "We have a grabfest in primary".

Pricing conditions have also improved, as the negative basis -- or the gap between cash bond spreads and underlying credit default swaps -- has fallen sharply. Credit derivatives indexes, meanwhile, have been much less volatile than earlier in the year.

BMW's bond was priced around 10 basis points over its five-year CDS, one of the lowest premia since the last summer's credit crisis.