High-grade companies issued a total of nearly US$9bn of corporate bonds on 10 July to take advantage of low borrowing costs, in the biggest back-to-back issuance session in four months. The previous day’s session on 9 July saw a total US$6.8bn of bonds issued.
“It’s very much an issuer’s market, rather than an investor’s market,” said Jody Lurie, corporate credit analyst at financial advisor Janney Montgomery Scott. “Investors have so much cash and new issues are the best option because they are generally the most liquid.”
Sumitomo Mitsui Banking Corp led the market in Tuesday’s session with a US$3bn bond deal, followed by a US$2bn offering from Chilean state-owned mining company Corporacion Nacional del Cobre de Chile (Codelco) and a US$1.1bn offering from US company Penske Truck Leasing.
Companies are going to market to take advantage of favourable borrowing costs. Barclays’ index of corporate bond yields, for which data goes back to 1973, stood at a record low of 3.16% as of 9 July. The bank added that even at their current level, average corporate yields still provide investors with an extra 1.97 percentage point over US Treasury rates.
Sean Simko, head of a fixed-income portfolio management at SEI Investments, said that investor appetite remains robust as investors increasingly believe that the low-yield environment is here to stay. “We are not anticipating yields moving higher in the near future and at this point we feel credit fundamentals remain healthy,” he added.
The country is expected to survive the review, which it must do to retain its place in the European Central Bank’s asset purchase programme.
The bank believes that the battered UK currency, recently only just holding above the US$1.20 level, could be trading at US$1.36 by this time next year.
The Middle East oil producer’s debut global bond issue surpassed the total of US$16.5bn raised by Argentina when it tapped the market earlier this year.
The IT research and advisory group forecasts that worldwide IT spending in 2017 will edge 2.9% higher to total US$3.5 trillion.