(Bloomberg) — Middle East war. Rising yields and oil prices. Private credit distress. It barely seemed to matter for corporate borrowers this week as US investment-grade bond sales came close to yet another record.
Volumes reached $115 billion, just shy of the record weekly high of around $117 billion notched in 2020 when pandemic-related shutdowns and unprecedented measures by the Federal Reserve fueled a rush of capital raising by companies staring into the unknown.
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“With plenty of dark clouds out there — geopolitics, rate volatility, private credit nerves — it’s impressive how smoothly IG is functioning,” said John Lloyd, global head of multisector credit and a portfolio manager at Janus Henderson Investors.
The borrowing frenzy was driven by three blockbuster deals from Amazon.com Inc., software company Salesforce Inc. and Honeywell Aerospace Inc. The biggest of those, Amazon’s $37 billion transaction, was the fourth-largest dollar bond ever. Home-rental firm Airbnb Inc. also made a debut appearance to refinance debt.
In all, 23 firms sold bonds, about half the number of issuers in the 2020 week.
The market also smashed forecasts for $60 billion of issuance, helped in part by strong demand. Investors are still pouring cash into funds that buy high-grade debt as they become more cautious about their exposure to junk bonds and leveraged loans.
“Public credit markets have been healthy and resilient, and technicals certainly remain supportive,” said Mike Sobel, co-chief executive officer of Trumid, an electronic fixed-income trading platform. “Barring a day where volatility spikes across global markets, the IG market is open for large deals and issuers with the right story can still move size.”
Investors had been plowing money into the sector ahead of the Iran war. Short- and intermediate-term high-grade bond funds took in $43.4 billion in January, the most in five years, and $32.1 billion in February, according to LSEG Lipper data.
But signs of softness amid the surging supply are emerging, and some issuers are taking a cautious approach by setting up investor calls before officially launching deals. New issue concessions, the yield premium offered compared to where an issuer’s existing debt trades, have also generally been well above this year’s average.