(Bloomberg) -- Investors from New York to London to Tokyo are clamoring to buy investment-grade bonds, spurring heavy sales of the securities.
At least 81 high-grade bond sales have launched or been completed worldwide this week, including 19 that teed up for the US on Wednesday after a record 29 a day earlier. Uber Technologies Inc. is selling debt today, its first offering as a high-grade company. Automatic Data Processing Inc., a payroll company, is among the sellers as well.
Money managers are eager to buy bonds before the Federal Reserve starts cutting rates, a process that could begin as soon as this month and that could pull bond yields lower. Corporate finance chiefs are happy to borrow now because yields are relatively low now, and could conceivably rise if the US election boosts inflation concerns.
Yields on global investment-grade corporate bonds averaged 4.52% as of Tuesday’s close, near their lowest level in about two years.
“For issuers that are looking to print a low coupon, you could clearly see why they would be hitting the market at this point,” Robert Tipp, chief investment strategist and head of global bonds for PGIM Fixed Income, said in a phone interview.
In the US, the 29 companies that sold high-grade bonds on Tuesday represented a record number of issuers. In dollar terms, there were $43.3 billion of sales, the third-busiest day ever. In Europe, 22 blue-chip companies and government-tied issuers raised €21.7 billion ($24 billion) from debt markets yesterday, with another 11 offerings coming to market on Wednesday.
Asian borrowers, including the Indonesian government, sold a total of $5.6 billion of US-currency notes Tuesday, data compiled by Bloomberg show.
“We continue to prefer higher quality credits,” said Mark Reade, head of credit strategy at Mizuho Securities Asia. With the Federal Reserve poised to start cutting rates this month and the global economy still in reasonable shape, “we would not be surprised to see credit spreads squeeze a fraction tighter into year-end” for Asian dollar bonds, he added.
The bond blitz isn’t limited to high-grade companies. Speculative-grade firms are also getting in on the action, launching more than $17 billion of deals via the high-yield bond and leveraged loan markets on Tuesday, far outpacing last-year’s post-Labor Day activity.
For Latin American borrowers, Tuesday was the region’s busiest day for hard-currency debt issuance this year. The Uruguayan government, and lenders BBVA Mexico SA and Banco de Credito Del Peru joined Brazilian oil giant Petrobras in selling dollar notes.
Deal Pipeline
Japanese car-parts maker Denso Corp. is poised to sell dollar debt on Wednesday. US high-grade bond sales are expected to reach $125 billion this month, in line with last September’s $124.1 billion.
In high-yield markets, lenders that have been especially hungry to provide debt for new acquisitions and leveraged buyouts are finally seeing that supply hit the market. Formula 1 kicked off an $850 million leveraged loan sale to help fund its owner Liberty Media Corp.’s acquisition of MotoGP World Championship.
To John McClain, portfolio manager at Brandywine Global Investment Management, a combination of favorable borrowing costs and the need to get ahead of the US election has fueled the issuance frenzy.
“August lulled investors into tight spreads combined with ever strong demand for credit,” he said. “Issuers can borrow at rates we haven’t seen in a couple of years.”
--With assistance from Jeannine Amodeo, Gowri Gurumurthy, Hannah Benjamin-Cook, Christopher DeReza, Paul Cohen, Michael Tobin, Finbarr Flynn, Jessica Nix, Caleb Mutua, Ronan Martin, Paula Seligson, Brian Smith and Helene Durand.
(Updates with deals including Uber beginning in second paragraph)
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