By Karen Pierog
CHICAGO (Reuters) – U.S. investment-grade corporate bond deals soared to a record high this week as companies sought to take advantage of current low interest rates before they rise.
The number of investment-grade bond offerings were on track to surpass a record 36 new issues that were priced in the two days right after 2019’s Labor Day holiday, a BofA Global Research report from Tuesday said.
On Tuesday, 23 deals totaling $35.6 billion priced, while another 18 deals were on tap for Wednesday, according Refinitiv’s IFR.
Still-low U.S. Treasury yields, narrow spreads, and strong demand are enticing companies to sell new debt or refinance existing debt.
“If we start to see Treasury yields rise as we expect them to, that’s going to push up borrowing costs across the board,” said Collin Martin, fixed income strategist at the Schwab Center for Financial Research.
“So it could be corporations looking to take advantage now and maybe save a quarter of a percent, a half of a percent, nothing crazy, but any savings they can find if that rise in yields comes to fruition,” he added.
The yield spread on the ICE BofA U.S. Corporate Index, which tracks investment-grade debt, was steady at 92 basis points as of Tuesday. In late June, it slid to 86 basis points, the lowest since February 2007.
The spread refers to the interest rate premium investors demand to hold corporate debt over safer Treasury bonds.
In a report on Wednesday, Nicholas Colas, co-founder of DataTrek Research, said current spread data signals that investors remain confident that “issuers are well positioned to service current debt loads.”
“Late June may well have been ‘peak confidence’ for this market, but we go into September on a modestly stronger note than just two weeks ago,” he wrote.
(Reporting By Karen Pierog; Editing by Alden Bentley and Alistair Bell)
