Walt Disney Co., Ford Motor Co. and Deere & Co. inaugurated what is forecast to be the fifth straight year of more than $1 trillion of investment-grade corporate bond sales.
Disney, the world’s largest entertainment company, sold $3 billion of debt in five parts, according to data compiled by Bloomberg. Issues from the financing arms of Ford and Deere are among 10 deals announced Tuesday, the first investment-grade debt sales since Dec. 11, Bloomberg data show.
U.S. companies sold an unprecedented $1.621 trillion in debt last year, as corporate America rushed to take advantage of the Federal Reserve’s zero-rate monetary policy. Yields on investment-grade bonds reached a four-year high of 3.71 percent last month as the Fed boosted its benchmark rate for the first time in nearly a decade. But borrowing costs remain below the 4.49 percent average of the past 10 years, according to Bank of America Merrill Lynch index data.
"Yields are higher, and credit-market weakness will push more discipline on borrowers," said Anthony Valeri, an investment strategist at LPL Financial. “But as long as borrowing costs stay low relative to history, the heavy pace of issuance should continue."
Bond sales by investment-grade companies reached a record $1.31 trillion last year, bolstered by acquisition-related financing, according to data compiled by Bloomberg. With $627 billion in mergers expected to close in 2016, analysts like Bank of America Corp.’s Hans Mikkelsen expect more issuance is on the way.
Bank of America is predicting $1.22 trillion in issuance. The forecast from Morgan Stanley is $1.05 trillion, Wells Fargo & Co. foresees $1.24 trillion and Barclays Plc anticipates $1.34 trillion.
The longest-dated portion of Disney’s debt sales, a $500 million tap of an issue due in 2044, yielded 0.85 percentage point more than comparable government securities, according to a person with knowledge of the transaction, who asked not to be identified citing lack of authorization to speak publicly about the matter. The company issued $2 billion of debt on September, Bloomberg data show.
The company’s shares rose 12 percent last year, compared with a 0.73 percent decline by the Standard & Poor’s 500 Index. Disney’s 7 percent notes maturing in 2032, returned 0.96 percent last year, even as U.S. investment-grade debt posted a 0.632 percent loss, the first since 2013.
Ford Motor Credit sold a three-part issue totaling $2.75 billion, including 10-year bonds at a 2.15 percentage-point spread to benchmarks. John Deere Capital’s three-part deal came to $1.5 billion, with five-year securities at a 0.85 percentage-point premium.