US Corporate Bond Issues Nearing US$1 trillion Mark

US corporate bond issuance is fast approaching a record for the third consecutive year as companies take advantage of a surprising interest rate decline to stock up on cash, according to the
Wall Street Journal
.

The business daily reports that as of 21 August companies worldwide had sold about US$994.9bn of bonds in the US so far this year, citing data provider Dealogic whose figures date back to 1995.

The total is an increase of more than 4% from a year ago, with sales expected to cross the US$1 trillion level shortly helped by this week’s US$4.5bn sale from Bank of America Corp.

The
WSJ
cites investors and analysts, who confirm that companies are raising funds partly with an eye to investing in fresh projects as the US economy gains pace, a move that can further help along economic growth.

Acquisitions have roughly doubled in the US from last year to a recent US$1.1 trillion, and US bond sales earmarked for capital spending – purchases or upgrades of long-lived assets such as plant and equipment – have risen 90% from a year earlier to US$40 billion, according to Dealogic.

The firm’s data shows that about US$315bn of corporate bonds have been sold in the US to repay or refinance existing debt, an approximately 35% increase over last year.

While bond sales linked to capital spending have risen, they remain below their pace about a decade ago, Dealogic said. Capital expenditures fell by 1% globally in real terms in 2013, according to Standard & Poor’s (S&P).

The sums raised to refinance debt, bolster corporate cash and pay shareholders emphasise the difficulty of finding high-returning investments since the 2008 global financial crisis, amid uneven US growth and low interest rates.

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