Investors pushed up the price of Microsofts $2 billion of 2.95 percent notes due in 2014, causing the gap between the yield and Treasuries to narrow as much as 30 basis points to 75 basis points, according to traders. The spread on $1 billion of 4.2 percent securities due in 2019 shrank as much as 6 basis points to 99 basis points, or 0.99 percentage point.

Redmond, Washington-based Microsoft, the worlds largest software maker, used its top credit rating and cash flow to attract investors. The company offered the smallest spreads a non-financial issuer has paid since October 2007, according to data compiled by Bloomberg.

The size of the deal and spreads underscore “the strength of the Microsoft franchise” and mark “a continued evolution towards a more mature capital structure,” Jefferies & Co. analysts led by Katherine Egbert in San Francisco said today in a research report to clients.

Microsoft, which also sold $750 million of 5.2 percent bonds due in 2039, plans to help fund a $40 billion share repurchase program, as well as build data centers to help narrow the gap with Internet search leader Google Inc. Microsoft has also said it wants to amass cash as a weak economy provides opportunities to acquire small and midsize companies.

The company was the first in a decade to receive the top AAA rating from Standard & Poors when it initially filed to tap debt markets in September. Moodys Investors Service also assigned its highest rating to Microsofts debt.

Source