The Oracle offices in Redwood City, California.
From tech behemoths to power producers, companies have pushed U.S. corporate-bond sales to historically high levels this month as firms capitalize on falling borrowing costs and unquenched investor demand.
Amid Oracle Corp.’s $18 billion deal yesterday, investment-grade issuance in September has topped $190 billion for just the seventh month ever, according to data compiled by Bloomberg.
On Tuesday, the high-grade market set an issuance record for September, which is typically one of the busiest months of the year. Last week, average spreads hit their tightest level in nearly three decades.
For investment-grade borrowers, “the timing could not be better,” said Mark Clegg, a senior fixed income trader at Allspring Global Investments. “New-issue concessions are absent, with massive order books for every deal.” Those concessions—the premium companies offer investors—have been running below 2024 levels, according to data compiled by Bloomberg’s Brian Smith.
Oracle saw peak demand of about $88 billion for yesterday’s bond sale, which is the second-biggest investment-grade deal this year.
Junk-bond sales, meanwhile, are set to reach their highest monthly total since September 2021—at $43 billion. Junk-bond yields have fallen to their lowest level since April 2022, when Federal Reserve interest rate hikes were beginning. Issuance of high-yield notes has surged since June as borrowing costs have fallen. Deals in the market yesterday included a $3.65 billion offering from power producer NRG Energy Inc.
Many junk bonds issued in 2022 and 2023 are now callable, and the current environment is favorable to refinance those with new debt, according to Bloomberg Intelligence analyst Noel Hebert.
With falling borrowing costs through the summer, firms have been rushing to take care of their financing needs before blackouts begin in several weeks as quarterly reports will soon be released. Issuance also typically slows in the fourth quarter, so some are moving now to lock in attractive funding levels.
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