July 1 (Bloomberg) -- Corporate bond sales worldwide capped the busiest first half of a year on record as borrowers take advantage of investor demand stoked by central banks’ unprecedented stimulus measures.
Oracle Corp. and Goldman Sachs Group Inc., which sold a combined $14 billion yesterday, pushed offerings during the first six months of 2014 to $2.29 trillion, beating the previous peak of $2.28 trillion issued during the same period in 2009, according to data compiled by Bloomberg. Yesterday was the busiest day since June 10 in the U.S.
Central banks’ actions to depress short-term lending rates have impelled institutional investors to seek higher-yielding company debt. While the European Central Bank cut its main refinancing rate to a record-low 15 basis points on June 5, the U.S. Federal Reserve is holding its benchmark rate near zero into a sixth year.
“The demand for these corporate bonds is so strong it’s outstripping the record supply,” said Brian Reynolds, chief market strategist for brokerage firm Rosenblatt Securities Inc. in New York. “Institutional investors like insurance companies and foundations are buying more aggressively now than ever in order to reach their yield targets.”
Oracle, the largest maker of database software, issued $10 billion of bonds yesterday in the second-biggest dollar-denominated corporate bond offering this year, while Goldman Sachs sold $4 billion of notes, according to data compiled by Bloomberg. Yesterday’s offerings in the U.S. totaled $15.9 billion, Bloomberg data show. The year’s biggest corporate issue in the U.S. was a $12 billion sale from Apple Inc. in April, the data show.
Issuance is accelerating as borrowers take advantage of yields approaching historic lows and the extra yield investors demand for the risk of holding corporate bonds instead of government securities is at about the least since 2007, Bank of America Merrill Lynch indexes show.
The U.S. corporate bond market is off to its fastest pace for the first half of the year with more than $880 billion sold, up from $789 billion in the same period last year, Bloomberg data show.
Investment-grade offerings reached $683.2 billion for the first half, beating the previous record of $655.4 billion set in the same period in 2009, Bloomberg data show. Yesterday’s high-grade sales of $14.75 billion were the most since $16.1 billion on May 12, the data show.
Speculative-grade sales also reached a record for the first half, with $196.8 billion that topped the previous high of $184 billion in 2013, the data show. High-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and less than BBB-at Standard & Poor’s. A basis point is 0.01 percentage point.
U.S. corporate bonds have generated returns of 5.9 percent, or 12.2 percent annualized, which would be the last decade’s second best year after 2009. In the first half of that year, issuance surged as banks sold securities backed by the Federal Deposit Insurance Corp.’s Temporary Liquidity Guarantee Program and credit markets began to unfreeze after the financial crisis, reviving investor confidence.
In Europe, companies are debuting a record amount of bonds as investors demanding higher yields show greater tolerance for untested borrowers who are seeking to diversify funding as banks curtail lending.
“It reflects the reduced ability of European banks to make business loans,” said John Lonski, chief economist at Moody’s Capital Markets Research Group. “Non-financial companies are being forced to enter the bond market to secure capital” because they can’t rely on banks for loans, he said.
Sales of junk bonds in Europe exceeded $100 billion this year for the first time, up from $56 billion in the first half of 2013, Bloomberg data show.
“The record global bond issuance has a European accent,” said Lonski.
To contact the reporter on this story: Adam Janofsky in New York at email@example.com
To contact the editors responsible for this story: Shannon D. Harrington at firstname.lastname@example.org John Parry, Faris Khan