Corporate issuers from Texas Instruments Inc. to Unilever NV are exploiting near record-low interest rates in the U.S. by selling bonds with unprecedented coupons in the busiest start to a week since March.
Texas Instruments, the largest maker of analog chips, and London- and Rotterdam-based Unilever issued a combined $2.5 billion of debt that each included a record 0.45 percent coupon on three-year notes. Companies have sold or are planning to issue at least $10 billion of debt today, the busiest start to a week since March 19, according to data compiled by Bloomberg.
Borrowers are tapping U.S. credit markets after yields on investment-grade bonds dropped to a record 3.049 percent last week, according to Bank of America Merrill Lynch index data. Investors are attracted to higher-rated companies such as Texas Instruments and Unilever, whose debt is deemed safer as European policy makers struggle to solve the region’s fiscal crisis, according to Rajeev Sharma of First Investors Management Co.
“Investors have typically tried to buy a little more high quality in this type of environment, where Europe is still a question mark,” Sharma, whose firm oversees $1.5 billion of high-grade debt, said in a telephone interview.
The extra yield borrowers demand to own U.S. investment-grade debt instead of government securities narrowed to 195 basis points July 27, from 215 basis points at the end of June, Bank of America Merrill Lynch index data show. High-grade companies have sold $618 billion of debt in the U.S. this year, up 7 percent from last year, data compiled by Bloomberg show.
Unilever, the world’s second-biggest consumer-goods maker, behind Procter & Gamble Co., issued $450 million of three-year notes and $550 million of five-year debentures. The maker of Dove soaps and Ben & Jerry’s ice cream last sold dollar debt in February 2011, Bloomberg data show.
Texas Instruments sold $1.5 billion of debt in the Dallas-based company’s first offering in more than a year with equal $750 million portions of three- and seven-year bonds. The sale was larger than the $1 billion that was marketed earlier in the day, according to a person familiar with the offering who asked not to be identified, citing lack of authorization to speak publicly.
Teck Resources Ltd., Canada’s biggest base-metals producer, sold $1.75 billion of debt in the day’s biggest offering that included bonds due in 2018, 2023 and 2043, Bloomberg data show.
Other borrowers include Campbell Soup Co., the world’s largest soup maker, which issued $1.25 billion in bonds to fund its acquisition of juicemaker Bolthouse Farms, and Clinique skin-care maker Estee Lauder Cos., which raised $500 million to help refinance debt. TransCanada Corp., a Calgary-based natural gas distributor, sold $1 billion in 10-year notes.