Corporate bond sales in the U.S. capped the busiest November on record as issuance climbed to $45 billion this week, while relative yields narrowed as companies sought to lock in borrowing costs at almost unprecedented lows.
Costco Wholesale Corp., the largest U.S. warehouse-club chain, raised $3.5 billion in its first sale since 2007 and Burbank, California-based Walt Disney Co. issued $3 billion, leading sales that rose from $6.1 billion last week and were the busiest since $48.1 billion in the period ended Nov. 9, according to data compiled by Bloomberg. Sales of at least $165.1 billion this month topped the previous November record of $124.7 billion set in 2006, Bloomberg data show.
Issuance increased amid legislative talks on $607 billion in spending cuts and tax increases set to take effect next year. Companies that took advantage of low costs to sell debt may be seeking to avoid volatility stoked by the budget negotiations, according to Hans Mikkelsen at Bank of America Corp.
“There’s an extra sense of urgency because a lot of people are concerned about the fiscal cliff,” Mikkelsen, a New York-based credit strategist, said in a telephone interview. “Some companies may think that conditions are not going to get better than this, but could actually get worse.”
The extra yield investors demand to own corporate bonds rather than government debentures fell 2 basis points this week to 240 basis points yesterday, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Master index. Yields on the debt decreased to 3.6 percent from 3.67 percent on Nov. 23. Yields have increased from a record low 3.58 percent on Oct. 19. A basis point is 0.01 percentage point.
Sales of investment-grade debt this month reached $135.9 billion, the most on record for November and compared with $88.4 billion in the same period last year, Bloomberg data show. High-yield issuance dropped to $29.2 billion, the busiest November since 2010, from $48.3 billion last month.