Companies borrowing to complete deals and prop up their stockprices are helping to keep U.S. investment-grade debt sales atabout a record pace, defying predictions of a slowdown.

Apple Inc. and Leuven, Belgium-based Anheuser-Busch InBev NVhave led $476.6 billion of offerings this year, almost matching the$477.4 billion sold during the same period in 2013, anunprecedented year for U.S. issuance, according to data compiled byBloomberg. Apple's $12 billion deal to fund shareholder rewards andAB InBev's $5.25 billion sale in January to finance its purchase ofSouth Korea's Oriental Brewery Co. are spurring the second-busiestperiod ever for debt sales used to fund mergers, acquisitions,dividends and share buybacks.

Companies are taking advantage of an unexpected reprieve fromrising borrowing costs after a first-quarter economic slowdown andtepid inflation boosted demand for fixed-income assets. Whileanalysts ended 2013 predicting high-grade sales would lose steamthis year amid rising interest rates, borrowing benchmarks haveinstead declined to an 11-month low.

“What really surprised us at the beginning of the year was thedecline in interest rates,” Hans Mikkelsen, head of U.S.investment-grade credit strategy at Bank of America in New York,said in a telephone interview. “Issuers have a window ofopportunity to issue at very attractive yields that they didn'texpect.”

Borrowing costs fell beginning in January as a rout in emergingmarkets and weakness in the U.S. and China prompted investors toseek the safety of government debt, upending predictions for10-year Treasury yields to reach as high as 3 percent by the end ofthe first quarter, according to a Bloomberg survey of economists.Yields instead fell 31 basis points to 2.72 percent during theperiod before reaching 2.62 percent yesterday.

Yields on dollar-denominated, investment grade bonds reached3.05 percent yesterday, the lowest since last June and within 41basis points of their all-time low, according to the Bank ofAmerica Merrill Lynch U.S. Corporate Index.

“These are all levels that could prompt some new issuance intothe market,” Kevin Flanagan, the chief fixed-income strategist atMorgan Stanley Smith Barney in Purchase, New York, said in atelephone interview. “I don't think you would want to sit here andwait and think” that yields will fall below 2.5 percent, hesaid.

Apple's Return

The drop in borrowing costs spurred $112.3 billion of high-gradebond sales last month, the third-busiest April on record, led byApple's return to the market after its $17 billion offering a yearearlier, Bloomberg data show.

A total of 15 companies have sold $38.3 billion of high-gradebonds in the U.S. this year to help fund mergers and acquisitions,leveraged buyouts, share buybacks or dividend payments, Bloombergdata show. That's the most for the period after $46.3 billion inthe similar timeframe last year.

Bank of America last year projected a 16 percent drop ininvestment-grade sales for 2014, while Barclays Plc forecast adecline of 8 percent for fixed-rate debt.

Predictions for a slowdown could still prove correct as theeconomy recovers from the first-quarter slowdown and borrowingbenchmarks begins to reverse, Mikkelsen said.

The economy is “bouncing back,” he said, citing last week's jobsreport showing employers boosted payrolls by the most in two yearsand retail sales that posted the biggest gains since September2012. “You can kind of see a rapid normalization of interest ratesin the coming weeks,” he said. “We are getting to the inflectionpoint.”

Sales have dipped during the second half of the year in eight ofthe past nine years, with offerings in 2013 dropping 10 percent to$543 billion from $604 billion in the first six months, Bloombergdata show.

Apple, the Cupertino, California-based iPhone maker, is usingproceeds to fund a $30 billion increase to a shareholder rewardprogram that buys back shares and makes dividend payments,according to a company filing. Apple, which raised the debt as acheaper alternative to the taxes it would face by repatriatingoffshore cash, boosted the program for the second time in 12months.

Cisco Systems Inc. raised $8 billion in February to help financestock buybacks, while Rogers Communications Inc. sold $750 millionin the U.S. in March to buy spectrum, Bloomberg data show.

AB InBev's sale included $850 million of 4.625 percent, 30-yearbonds at a relative yield of 90 basis points, Bloomberg datashow.

“If you see how the cost of funds has decreased this year andM&A activity has increased, I think there is still a lot ofsupply to come,” Dorian Garay, a New York-based money manager foran investment-grade debt fund at ING Investment Management, said ina telephone interview.

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