(Updates with individual deal sizes, adds commentary.)
By Katy Burne
U.S. corporate bond issuance has exceeded $100 billion for
September, only the third time it has crossed that monthly
threshold since at least 1995, according to data provider
Dealogic.
Benign market conditions and a lack of negative developments in
Europe's debt crisis threw the gates wide open for corporate
borrowers on Monday. More than $11 billion of new bonds were sold,
on top of $93.9 billion issued from the start of the month through
Friday. Leading the charge are United Parcel Service (UPS), with a
$1.75 billion deal, and billion-dollar offerings from foreign
banks.
"Whether you are thinking there will be potential flare-ups from
Europe or from the fiscal cliff, there is still a desire for
issuers to get in while the markets are good," said Andrew Karp,
head of investment-grade debt syndicate at Bank of America Merrill
Lynch, who worked on at least five of the offerings.
He said companies are tapping the market now in case jitters
over Europe return and force their borrowing costs higher.
The volume of debt sales is expected to slow in October, when
companies retreat into earnings season, leading more issuers to
cram their borrowing into this month. Only two Septembers in recent
memory have seen $100 billion of U.S. corporate debt issuance: 2009
and 2010, according to Dealogic.
UPS's offering was its first since November 2010 and the parcel
carrier was joined by a host of banks--Mexico's BBVA Bancomer SA
raising $1.5 billion, France's Credit Agricole (CRARY, ACA.FR) for
$1 billion, the Canadian Imperial Bank of Commerce (CM, CM.T) for
$1 billion and Sweden's Swedbank AB (SWDBY, SWED-A.SK) for another
$1 billion.
Also in the market were fertilizer maker Agrium (AGU, AGU.T) for
$500 million; Newcrest Finance Pty, a unit of Newcrest Mining Ltd.
(NCMGY, NCM.AU, NM.T), for $1.25 billion; Hyundai Capital America,
the finance arm of car maker Hyundai Motor (HYMLY, 005380.SE), for
$1 billion; utility Commonwealth Edison, a unit of Exelon Corp.
(EXC), for $350 million; shopping-center operator Westfield Group
for $500 million; and Penske Truck Leasing Co. for $1.5
billion.
Investors still have plenty of money to put to work in corporate
bonds, despite sinking yields. "Investors can't get enough of
corporate bonds so they will pay whatever price to get it, but
that's making it yield less and less and meaning issuers don't have
to pay as much to borrow," said Jody Lurie, corporate credit
analyst at Janney Capital Markets.
Mutual funds and exchange-traded funds dedicated to
investment-grade bonds saw $1.8 billion of inflows for the week
ended Sept. 19, and $2.32 billion in the prior week, according to
Lipper data.
The Barclays U.S. Corporate index, a measure of performance in
investment-grade corporate bonds, has returned 7.89% this year,
compared to 15.76% for the S&P 500 or 18% with dividends
reinvested.
"Investor appetite for corporate credit exposure remains
unsated," said Edward Marrinan, macro credit strategist at Royal
Bank of Scotland in a note Monday.
He said demand is greatest for investment-grade debt rated
triple-B or with maturities of more than 10 years because those
bonds offer juicier returns to investors in the low-yield
environment than top-quality deals.
-Write to Katy Burne at katy.burne@dowjones.com