GRM Graham Packaging CO Inc. Common Stock

Ford Motor Credit sold a 10-year benchmark issue of high-yield debt Wednesday, extending a resurgence of the high-yield bond market which had stalled last month amid increasing concerns about the Greek debt crisis and then worries about the U.S. debt ceiling.

The finance unit of Ford Motor Co. (F) tapped the market the day after another issuer, hospital chain HCA Inc. (HCA), raised $5 billion in speculative-grade debt, the largest so-called junk-bond deal since June 2008. Also on Tuesday, Reynolds Group Holdings sold $2.5 billion in notes to finance its acquisition of Graham Packaging Co. (GRM).

In the first three days of this week, issuers have brought to market $9.6 billion in new bonds; only about $5.61 billion were sold in the first three weeks of the month, according to Wells Fargo data.

"We are seeing a turnaround in the market," said Jim Casey, co-head of J.P. Morgan Chase & Co.'s syndicated and leveraged finance group. "Investors started putting cash back into high-yield as there are not that many great options away from high-yield."

Andrew Feltus, senior vice president and portfolio manager of Pioneer Global High Yield Fund, said the recent spurt in investor interest shows there is plenty of cash out there looking for investment opportunities. Feltus, who oversees $11 billion in funds, said he participated in the HCA offer.

"Investors are looking around, and you see a lot of money leaking into the high-yield market," he said.

Investors have increased the amount of money placed in junk-bond mutual funds over the past couple of weeks after a brief period in June when nearly a net $6 billion flowed out of those funds, according to Lipper's weekly fund flows data.

Further, fund managers have seen steady income from their investments over the last couple of years and need to put these proceeds someplace offering a higher return than the negligible yields on Treasurys and even most investment-grade corporate bonds, said Sabur Moini, high-yield fund manager at Payden & Rygel in Los Angeles.

Even then, many investors were surprised by the size of HCA's bond sale. The company, a respected issuer in the junk bond market, had been waiting since June for the right time to refinance existing debt. After the announcement of its disappointing results on Monday, the newly listed company saw its stock price drop by more than 20% but its bonds held steady. The company and its bankers decided to take the plunge with a $1 billion issue.

"There was so much inquiry" that the company decided to expand its refinancing, Moini said. About $10 billion of orders were placed, largely driven by one investor, according to a source familiar with the deal. The company, after a brief huddle, decided to increase the size of its offering to $5.15 billion, though it ended up selling only $5 billion.

More than 200 investors ultimately participated in the deal, the source said.

This kind of investor response comes on the back of some other recent deals that have seen investors push back, demanding higher yields and compensation for the risk as the tenor of the market changed.

"We really are looking at three distinct market phases," said Casey, of J.P. Morgan. Issuance of junk bonds went from near market peak in May to the largest outflows in the history of the market in June. Now there seems to be a sudden return of investor interest.

From this point on, the pace of issuance is expected to pick up a bit, but won't return to peak volumes, Casey said. But investors are not sure.

"People are being cautious still," said Moini. "There's still uncertainty out there."

-By Prabha Natarajan, Dow Jones Newswires; 212-416-2468; prabha.natarajan@dowjones.com

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