Xstrata Plc and Oracle Corp. led borrowers raising at least $20 billion in the second-busiest day this year for U.S. corporate bond sales.
Xstrata, the world’s largest exporter of coal burned by power stations, raised $4.5 billion in four parts, while Redwood City, California-based Oracle sold $5 billion in its first offering in more than two years, according to data compiled by Bloomberg. Sales are the highest since $26.9 billion was raised on March 5.
Borrowing costs on dollar-denominated debt are hovering at unprecedented lows, with average yields on the Bank of America Merrill Lynch U.S. Corporate & High Yield Master index reaching 3.6 percent today. Companies are issuing debt as opportunities on the calendar free from election- and holiday-related disruptions diminish before year-end, according to Simon Mayes at BNP Paribas SA.
Issuers “have an eye on the upcoming elections and anticipate a quieter period in the election week, and the week in the lead up,” Mayes, head of the financial institutions group syndicate in New York, said in a telephone interview. “Leaving issuance to December is not a recommended strategy in terms of running out of time and going into the holiday period.”
Yields on bonds from the most creditworthy to the riskiest borrowers fell to an unprecedented 3.591 percent on Oct. 16, 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 222 basis points, the lowest since April 2011.
Xstrata, the target of a takeover bid by Glencore International Plc, issued $1.25 billion of 1.8 percent, three-year notes to yield 140 basis points more than similar-maturity Treasuries, $1.75 billion of 2.45 percent, five-year debt at a relative yield of 170 basis points, $1 billion of 4 percent, 10-year securities at a spread of 220 basis points and $500 million of 5.3 percent, 30-year debentures at 235 basis points, Bloomberg data show. Proceeds from the bonds, issued by Xstrata Finance Canada Ltd., will be used to repay maturing obligations.
Oracle, the world’s largest supplier of database software, issued $2.5 billion each of 1.2 percent, five-year securities at a relative yield of 45 basis points and 2.5 percent, 10-year debt at a spread of 68 basis points, Bloomberg data show.
Bank of New York Mellon Corp., the world’s largest custody bank, raised $1.5 billion selling $600 million of 0.7 percent, three-year fixed-rate debt at spread of 33 basis points, $400 million of three-year floating-rate notes to yield 23 basis points more than the quarterly London interbank offered rate, and $500 million of 1.3 percent securities due January 2018 at a spread of 55 basis points, Bloomberg data show.
Morgan Stanley, the sixth-largest U.S. bank whose third- quarter results today beat analysts’ estimates, sold $2 billion of 4.875 percent, 10-year subordinated securities at a spread of 310 basis points, Bloomberg data show. The sale was its first benchmark offering of subordinated debt since 2004.