Record $217 Billion Corporate Bond Issuance in September
Corporations are scrambling to raise cash to complete buyouts or simply because they can. Barron's reports September Sees Record $217 Bln Corporate Bond Issuance
September isn’t completely finished just yet and it’s already produced a record $217 billion in U.S. corporate bond issuance, an 18% bump from the previous single-month record, according to Janney Montgomery Scott. The secondary market fed off the activity of the primary market, translating to $394 billion in total trading, about 70% of which was in investment grade credits.
Five days ago Bloomberg reported Verizon and Sprint Lead Record Month for U.S. Bond Issuance.
Sales of corporate bonds in the U.S. reached an all-time high this month, with phone companies Verizon Communications Inc. and Sprint Corp. leading offerings of about $193.7 billion.
Verizon issued $49 billion on Sept. 11 in the biggest corporate bond deal ever while Overland Park, Kansas-based Sprint raised $6.5 billion on Sept. 4 in the largest high-yield sale since 2008, according to data compiled by Bloomberg. Offerings broke the previous monthly record of $177.3 billion set in September 2012.
Following the Fed’s surprise decision to leave the program untouched, yields on the Bank of America Merrill Lynch U.S. Corporate & High Yield Index dropped to a six-week low of 4.05 percent yesterday.
“Issuers are saying ‘let’s strike now because we have the wind at our back,’” Timothy Cox, executive director of debt capital markets at Mizuho Securities USA Inc. in New York, said in a telephone interview. “There’s no reason to wait.”
Yields from the most creditworthy to the riskiest U.S. borrowers declined from a 15-month high of 4.37 percent on Sept. 5, index data show. Yields touched an unprecedented low of 3.35 percent on May 2.
Largest Bond Deal Ever
Also consider Verizon Raises $49 Billion in Largest Corporate-Bond Sale.
Verizon Communications Inc. (VZ) sold $49 billion of bonds in eight parts in the biggest company debt offering ever.
The second-biggest U.S. telephone carrier issued fixed-rate debt with maturities ranging from three to 30 years as well as two portions of floating-rate securities, according to data compiled by Bloomberg.
The deal, which is about the size of all outstanding obligations of the Slovak Republic, is helping to fund New York-based Verizon’s buyout of partner Vodafone Group Plc. (VOD)’s 45 percent stake in the largest and most profitable U.S. wireless carrier, Verizon Wireless. The sale is more than double the previous issuance record of $17 billion from Apple Inc. sold in April.
The 30-year securities, the biggest corporate bond ever issued, traded as high as 107.6 cents on the dollar as of 1:12 p.m. in New York from an issue price of 99.883 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The bubble in corporate bonds is massive. And it's one of the things that has helped lift the stock market as well.
Mike "Mish" Shedlock