So much for the unofficial start of summer. Corporate-bond sales in the U.S. since the Memorial Day holiday are off to the fastest pace in five years as companies from Verizon Communications Inc. to Baytex Energy Corp. lead more than $48 billion of issuance.
Verizon, the largest U.S. wireless carrier, sold $3.3 billion of dollar-denominated debt this week, and junk-rated Baytex, based in Calgary, borrowed $800 million on May 29, according to data compiled by Bloomberg.
Issuance is picking up as companies take advantage of investors demanding the least extra yield to own corporate debt instead of Treasuries since 2007. That’s helping to support the busiest seven-day period following the U.S. holiday since 2009, when $51.6 billion of notes were sold.
“Cost-wise it’s a pretty efficient period to issue debt,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “The degree of demand in the investment-grade credit market in particular is off the charts.” Insurers seeking more long-maturity corporate bonds are among the buyers, he said.
High-grade companies including AT&T Inc., Walt Disney Co. and 3M Co. have each exploited that demand by issuing 30-year bonds with a weighted average coupon of 4.57 percent, Bloomberg data show. The U.S. government paid about that rate as recently as 2011.
Baytex, the oil and natural gas explorer, sold equal $400 million portions of notes due in 2021 and 2024 to fund a tender offer. The offering accounted for more than a quarter of all high-yield issuance since the May 26 holiday, Bloomberg data show. Verizon, based in New York, issued debt due in 2017 in a transaction split between $1.3 billion of floating-rate notes and $2 billion of 1.35 percent securities.
Bonds of the most creditworthy to the riskiest corporate borrowers yielded 1.65 percentage points more than Treasuries yesterday, down from 1.87 percentage points at year-end and a spread of 2.18 percentage points a year ago, according to Bank of America Merrill Lynch index data.
Memorial Day is often referred to as the de facto start to summer, which precedes the June 21 solstice.
Corporate-bond sales typically slow down as traders transition into the summer-vacation season. The $29.2 billion of U.S. debt sold this week through yesterday is already approaching the 2014 average of $32.8 billion. A year ago, issuance for the similar period was $15.4 billion, less than half the weekly average at that point.