No Summer Slowdown in Bond Market as August Sales Set Record

Updated on
  • Companies raised $88 billion worldwide in first week of month
  • BMW, HSBC sell sterling notes after Bank of England rate cut

There’s no sign of a summer holiday in the corporate-bond market.

Companies worldwide are poised to raise more than $100 billion so far this month, the most for the period in Bloomberg data going back to 1999. Issuance showed no sign of slowing on Monday in the U.S., with Berkshire Hathaway Inc. leading the day with a $2 billion offering, according to a person familiar with the matter who asked not to be named because the deal is private. The company was joined by nine other borrowers, including Ford Motor Co. and Archer-Daniels-Midland Co.

In Europe, Bayerische Motoren Werke AG, HSBC Holdings Plc and BNP Paribas SA sold 2.1 billion pounds ($2.7 billion) of notes on Monday, according to data compiled by Bloomberg. 

The boom in issuance, including a $19.75 billion Microsoft Corp. deal, has been fueled by record-low borrowing costs as central banks in Europe and Japan buy assets to stimulate growth. The Bank of England last week cut interest rates and expanded quantitative easing to help support the U.K. economy following the nation’s June 23 vote to the leave the European Union.

“Issuers have realized they’ve got a slightly longer window than they would normally see,” said Luke Hickmore, senior investment manager at Aberdeen Asset Management Plc in Edinburgh, which oversees 301 billion pounds. “August tends to be a very quiet month.”

HSBC sold 1 billion pounds of 12-year notes, while BNP issued 500 million pounds of six-year bonds, according to data compiled by Bloomberg. BNP declined to comment on its sale. The deal was the French bank’s first in sterling for almost four years, Bloomberg data show. No one was immediately available for comment at HSBC.

BMW sold 600 million pounds of six-year bonds. The notes were priced to yield 0.88 percent annually, according to a person familiar with the matter, who asked not to be identified as they aren’t authorized to discuss the matter publicly.

“In view of the Bank of England’s rate cut and announced QE measures last week, market conditions have improved, so we are taking advantage of that,” Ziye Zhou, a spokesman for the Munich-based automaker, said in a phone interview.

The average yield on sterling-denominated corporate bonds has fallen to a record-low 2.19 percent, according to Bank of America Merrill Lynch index data. Globally, the average is near the lowest ever at 2.3 percent, the data show.

Microsoft held its biggest bond sale on Aug. 2 to help finance the acquisition of LinkedIn Corp.