Surge in U.S. Corporate Debt Offerings

Investing.com — The U.S. corporate debt market has seen a surge in new bond offerings this week, fueled by rising Treasury yields that have increased demand for debt, according to Reuters.

Companies are moving swiftly to secure funding before borrowing costs rise further. In the first week of the new year, approximately $75 billion of investment-grade rated bond supply has been issued.

This figure is expected to increase as three more corporate and approximately eight sovereign and supranational bond offerings are anticipated to be priced on Wednesday, according to data from Informa (LON:INF) Global Markets.

Investment-grade rated bonds are priced at a spread premium over risk-free U.S. Treasuries. However, concerns linger regarding a sell-off in Treasuries and a rise in the dollar, which could continue to shake financial markets.

The uncertainty over incoming U.S. President-elect Donald Trump’s policies and their potential impact on U.S. interest rate easing adds to these concerns.

Despite these uncertainties, investor demand at higher yields has remained robust, placing pressure on corporate credit spreads and somewhat neutralizing the effect of rising yields on funding costs.

This mix of rising yields and tightening spreads is predicted to benefit both issuers and investors, keeping the current issuance frenzy alive. A brief pause is expected before it resumes.

The upcoming abbreviated session on Thursday, in tribute to the late 39th U.S. President Jimmy Carter, along with the release of jobs data on Friday, is likely to slow issuance. Additionally, U.S. companies generally avoid issuing bonds before releasing earnings, which are expected to commence later this week.

Bankers estimate that new bond offerings in January could raise between $175 billion to $200 billion. If volumes touch $200 billion, it would be only the fifth time in history that monthly issuance has reached that level, based on Informa Global Markets data.

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