US companies storm debt markets after risk premiums plunge

COMPANIES of all stripes are diving into the debt market on Tuesday (Nov 12), taking advantage of robust demand and relatively favourable borrowing costs.

Banks including Citi, Goldman Sachs, HSBC and BNP Paribas are among 13 firms selling investment-grade bonds on Tuesday. That marks the busiest day for high-grade deals since Sep 4, which featured 19 transactions, according to data compiled by Bloomberg.

In the high-yield market, companies including Trans-Oil Group and Xenia Hotels launched sales.

Companies are eager to borrow now, after having been effectively blocked from selling bonds last week by the US presidential election and the Federal Reserve meeting, both of which were at risk of triggering big moves in underlying yields. Now some borrowers are looking at borrowing at a time when risk premiums are relatively low, but yields may head higher amid new US policies such as tariffs that could bring inflation.

A relatively smooth election resolution and the Federal Reserve’s quarter point cut last week led to a drop in volatility, boosted the US dollar and drove tight spreads, according to a note from Bloomberg Intelligence analysts Noel Hebert and Sam Geier.

The average US high-grade bond spread, the extra yield over US Treasuries that investors are offered to hold riskier debt, is around 74 basis points, according to data compiled by Bloomberg. That’s the lowest level seen since 1998.

Four junk-bond deals and at least eight leveraged loan deals are also on tap on Tuesday. That’s as junk yields are around 7.12 per cent, the lowest since early October.

“Nearly all the market’s immediate needs in terms of refinancing for 2025 have already been handled,” said Ken Monaghan, managing director of high yield at Amundi Asset Management. “The question therefore is going to be refinancing for maturities in 2026 and beyond, and what kind of new issuance we will see as it relates to M&A.” BLOOMBERG

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