Merck & Co. and Walgreen Co. led borrowers selling $17.9 billion of corporate bonds in the U.S. Monday.
Merck, the maker of Claritin, raised $2.5 billion of debt in three parts in its first sale since 2010 and Deerfield, Illinois-based Walgreen issued $4 billion of bonds linked to its acquisition of a stake in Alliance Boots Holdings Ltd., according to data compiled by Bloomberg. Sales compare with $18.6 billion on Sept. 4, the busiest day for dollar-denominated sales in almost six months.
Issuers are selling bonds ahead of a meeting this week by the U.S. Federal Reserve, where policy makers may announce further quantitative easing. Companies are timing the market to obtain record-low interest rates as they capitalize on high demand ahead of potential volatility, according to Rob Crimmins, a money manager in New York at RS Investments, which oversees $30 billion.
Borrowers are looking at the level of rates and taking the opportunity to issue, Crimmins said in a telephone interview. “There’s still strong demand technically for the corporate markets.”
Yields on debt from the most creditworthy to the riskiest borrowers reached 3.837 percent on Sept. 7, a record low, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Master index. The extra yield investors demand to own corporate bonds rather than government debentures fell to 259 basis points.
Today’s sales will help boost this month’s offerings to more than $57.5 billion, Bloomberg data show.
Merck sold $1 billion each of 5.5-year, 1.1 percent notes to yield 50 basis points more than similar-maturity Treasuries and 10-year, 2.4 percent securities at a relative yield of 75 basis points, Bloomberg data show. The company also sold $500 million of 30-year, 3.6 percent debentures at 90 basis points.
The offering was the company’s first since December 2010, Bloomberg data show.
Walgreen, the largest U.S. drugstore chain, sold $4 billion of bonds in five parts to help repay debt linked to its $6.7 billion acquisition of a 45 percent interest in Alliance Boots, the company said today in a filing.
The drugstore operator issued $550 million of 18-month floating-rate notes to yield 50 basis points more than the three-month London interbank offered rate, $750 million of 1 percent, 2.5-year securities at 80 basis points more than benchmarks, $1 billion of 1.8 percent, five-year bonds at a spread of 120 basis points, $1.2 billion of 3.1 percent, 10-year debentures at 145 basis points and $500 million of 4.4 percent, 30-year debt at 165, Bloomberg data show.
Transocean Ltd., the owner of the oil rig that exploded in the Gulf of Mexico in April 2010, sold $1.5 billion of debt to fund the construction of four drillships.
The world’s largest offshore oil driller sold equal portions of $750 million of 2.5 percent, five-year securities to yield a 190 basis-point spread and 3.8 percent, 10-year notes at 220 basis points, Bloomberg data show.
ConAgra Foods Inc., the maker of Chef Boyardee and Healthy Choice meals, raised $750 million, Bloomberg data show. The Omaha, Nebraska-based company sold $250 million each of three, 5.5- and 10-year debt.
Other issuers in the market include Dominion Resources Inc., the largest utility in Virginia, with a $1.05 billion sale and Tulsa, Oklahoma-based Oneok Partners LP with a $1.3 billion offering, according to people familiar with the transactions.