Companies across the globe sold a record amount of bonds in September, as low borrowing costs fuelled issuance and investors searching for yield lapped up the new debt.
A total of $434bn of corporate bonds were sold globally in September, according to data from Dealogic. The new monthly high follows the biggest single week of issuance on record at the beginning of the month.
September is typically a busy month for the bond market, with banks and investors coming back from summer holidays ready to put money to work. It has been amplified this year by a global bond rally in August which lowered interest costs for a host of companies looking to sell debt.
“It’s very attractive for issuers coming into the market right now,” said Monica Erickson, a portfolio manager at fund manager DoubleLine.
The bond rally sent yields lower across all kinds of debt, pushing some investors out of the perceived safety of government bonds in search of the higher yields available from corporate issuance.
Close to $15tn worth of debt globally carried a negative yield at the end of September. By contrast, the average yield on a US investment grade bond index run by Ice Data Services stood at 2.96 per cent.
“The big theme here is a search for yield and a search for return,” said Rebecca Patterson, chief investment officer at Bessemer Trust. “As you have more and more negative yielding government bonds around the world, investors that need income are looking to the US.”
Dollar-denominated debt accounted for a majority of issuance over the month with $159bn of bonds sold, the third-biggest month on record. Apple, the iPhone maker, returned to the market for the first time since November 2017 to issue $7bn worth of debt, with media giant Disney selling the same amount of bonds.
“The global corporate bond market is where there is yield,” said Hans Mikkelsen, a credit strategist at Bank of America Merrill Lynch. “The US is the biggest part of that and has the highest yield.”
In a sign of the strength of investor enthusiasm, $17bn flowed into US corporate bond funds over the past month, extending a 38-week streak of inflows, according to data from EPFR Global.
The raft of debt issuance has raised some concerns about corporate America over-leveraging. However, analysts and investors said that many companies coming to market have been taking advantage of favourable market conditions to extend debt maturities and lower borrowing costs.
“Companies are taking out near-term maturities, extending their debt profile and reducing interest expense,” said Tom Murphy, a portfolio manager at Columbia Threadneedle. “All of those things are good for investors.”
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