Bond Issuance Spree As U.S. Companies Rush Before More Rate Hikes

• Companies with the highest credit ratings in the world are engaged in a now-or-never US dollar bond issuance spree to get ahead of a continued spike in borrowing costs and as liquidity in the market is expected to dwindle in the next few months.
• The first working day after a long holiday weekend (Labour Day) saw 19 investment-grade rated companies raise $35.35Bn, the most to price in a single day this year, according to IFR/Refinitiv.
• The 44 tranches of bonds sold by the 19 companies on Tuesday were also the most ever priced in a single day, beating a previous record of 39 tranches sold on September 3, 2019, according to Informa Global Markets data. On Wednesday, seven more companies raised $11.25Bn.
• Liquidity in bond markets has been patchy in recent months as investors cut back on debt investments that were sensitive to rising interest rates as a result of a hawkish stance by the Federal Reserve to combat runaway inflation.
• Year-to-date returns on investment-grade bond investments are down 15.2%, alongside a rise in U.S. Treasury yields as interest rates have risen and economic growth slowed.
• Companies are trying to get ahead of what they expect to be a tough road ahead in terms of borrowing costs. Already, the year-to-date 2022 new issue coupon levels for investment-grade companies have risen to 4%, the highest level since 2018, according to a CreditSights research note.

(Source: Reuters)