A $150 Billion Global Corporate Bond Binge Smashed Records

(Bloomberg) -- Bond bankers from London to New York and Tokyo have never had such an abrupt transition from leisurely summer lunches to scarfing down sandwiches at their desks.

September typically marks a return to busier issuance, but this year has been unprecedented as borrowing costs slide. Companies including Berkshire Hathaway Inc., Apple Inc., major Chinese conglomerate Dalian Wanda Group and Italian natural gas firm Snam SpA sold at least $150 billion-equivalent of bonds this week in dollars, euro and yen, the most ever in the first week of September.

The rush is all the more striking after an especially slow August, when sales stagnated due to the U.S.-China trade war, slowing global economic outlook and turmoil in Hong Kong. Developments this week helped temper those concerns: China and the U.S. agreed to trade talks early next month, data bolstered confidence in the American economy and Hong Kong’s leader formally withdrew an extradition bill that had sparked weeks of protests.

Read more about the bond bonanza in the U.S. here

Few are willing to forecast how long the binge may last, particularly given how President Donald Trump’s tweets have whipsawed financial markets in recent weeks. Protesters planned more gatherings in Hong Kong, and Fitch Ratings downgraded the city as an issuer of long-term, foreign currency debt for the first time since 1995, citing the political turmoil.

But for now borrowers around the world are loading up on cheap money while they can.

“The global primary pipeline has surged back to life, with investment-grade issuers looking to take advantage of low Treasury yields and tight spreads,” said Mark Reade, head of fixed-income research at Mizuho Securities Asia in Hong Kong. “Asian issuers are no exception, with regional sentiment having received an additional boost from confirmation of further U.S.-China trade talks in early October.”

Here are some highlights around the world:

In Asia

• Japan had one of the busiest days ever for pricing of yen company bonds on Friday, with about 1.7 trillion yen ($16 billion) of domestic and global yen notes sold, after borrowing costs there dropped near a three-year low.
• Warren Buffett’s conglomerate Berkshire Hathaway Inc. priced a 430 billion yen six-part offering, the biggest yen bond sale by a non-Japanese borrower.
• In Hong Kong, after the city’s leader Carrie Lam formally withdrew the bill allowing extraditions to China earlier this week, local firms Wharf Real Estate Investment Co. and Far East Consortium International Ltd. rushed to sell debt.
• Average yields on investment-grade dollar bonds from Asia rose Thursday but remain close to their lowest in three years.
• Sales are rebounding after orders for Asia dollar bonds slumped to the lowest in 11 months in August.

In the U.S.

• In the U.S., firms are borrowing $74 billion in the investment-grade bond market this week, the most for any comparable period since records began in 1972. Sales over three days this week nearly exceeded issuance in all of August.
• The frenzy included Walt Disney Co. and Coca-Cola Co.
• Investment-grade issuance is now down just about 2% from the same point last year. In June, the gap was closer to 13%.
• Companies now are by and large refinancing maturing debt, instead of funding big new capital projects.

In Europe

• Non-financial companies are on track to sell more than 20 billion euros of notes in Europe this week for the first time since March 2018.
• Oil-services giant Schlumberger Ltd. joined the rush on Friday with a three-part 1.5 billion-euro deal.
• Danaher Corp. sold the region’s second-biggest corporate deal this year on Tuesday, with a 6.25 billion-euro five-part sale to help fund the purchase of General Electric Co.’s bio-pharma business.

Investment-grade borrowers, which had lagged their high-yield peers earlier this year, are now taking advantage of low Treasury yields to sell bonds, according to Anne Zhang, head of fixed income for Asia at JPMorgan Private Bank.

--With assistance from Finbarr Flynn, Adrian Yim, Ayai Tomisawa, Neil Denslow, Molly Smith and Caleb Mutua.

To contact the reporters on this story: Denise Wee in Hong Kong at dwee10@bloomberg.net;Kyungji Cho in Seoul at kcho54@bloomberg.net;Rebecca Choong Wilkins in Hong Kong at rchoongwilki@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, ;Neha D'silva at ndsilva1@bloomberg.net, Michael Patterson

©2019 Bloomberg L.P.