The biggest rush of borrowers this year descended on the bond market Wednesday as companies sought to lock in financing before the Federal Reserve considers raising interest rates for the first time in almost a decade.

Global optimism that buoyed equities from Japan to Europe fostered demand for company debt and cleared the way for benchmark-sized bond deals, including a $10 billion offering by Gilead Sciences Inc. and Frontier Communications Inc.’s plan to raise $6.6 billion– which would be the year’s second-biggest junk offering.

Companies that have borrowed a record $1.2 trillion this year are taking advantage of renewed investor appetite and rock-bottom yields to close the loop on financing before a Fed rate hike makes it more expensive to sell debt. The flurry of deals today came after issuance froze for 13 consecutive days starting in August when concern about an economic slowdown in China crimped sales — exacerbating a lull during a period that’s historically slow.

“It doesn’t take much for people to change from despair to all of a sudden feeling like they are missing out,” said Timothy Doubek, who helps manage $26 billion in corporate debt at Columbia Threadneedle Investments. “After so many days with no issuance, there is a lot of pent up demand, and we are at a more attractive levels, which is spurring the activity. The mood has shifted.”

Issuance of nearly $14 billion in the investment-grade bond market Tuesday ended the longest late-summer dry spell in U.S. issuance since 2005. The 17 deals and 32 tranches of debt on the docket for Wednesday made it the most active of the year when counting issuers and deal components as sellers took advantage of historically low borrowing costs. About $27 billion of high-grade debt was expected to price Wednesday, the heaviest new-issue volume since March.

Gilead is planning to use proceeds from its six-part deal to repay debt, finance working capital, pay dividends and finance share buybacks, according to a regulatory filing by the drug maker. Frontier said it plans to sell the debt next week to back its purchase of landline assets from Verizon Communications Inc.

Other deals that priced today included Tyco International Plc.’s two-part sale of bonds that will go toward repaying debt and financing other capital spending, share repurchases or acquisitions. Lowe’s Companies Inc. sold a $1.8 billion deal in three parts, for which the longest-dated portion matures in 30 years, Bloomberg data show.

In high yield, Targa Resources Corp. sold $400 million of notes to repay debt and was among companies to reopen the junk bond’s new-issue market after three weeks.



Bloomberg News


Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.