A burst of post-Labor Day activity has ignited hopes that the corporate bond market could be coming back to life. As investment bankers, investors, and top executives returned to work this week from their end-of-summer hiatus, issuers raised or announced plans for more than $10 billion in new paper, according to The Wall Street Journal.
At the same time, Michael Materasso, global head of fixed-income at Fiduciary Trust International, forecast that total September issuance will come in around $40 billion.
Granted, that would be shy of the $54.74 billion issued in September 2003. It would also be in line with $38 billion average worth of bonds being issue per month, according to the paper, which cited data from software provider Dealogic.
But the time might be right for an upturn, some experts think. “A combination of lower interest rates and tighter spreads (between corporate bonds and Treasurys) makes it an attractive time for issuers to come out with offerings,” Materasso told the Journal. Around the time that the Federal Reserve raised its benchmark interest rate in August, actual bond-market interest rates drifted lower for a short while because of negative economic news.
Leading the charge was BellSouth Corp., which sold $3 billion of senior debt in two parts, led by J.P. Morgan, according to Reuters.
Lehman Brothers Inc. and RBS Greenwich Capital were the other joint lead managers for the $1.5 billion that was issued in five-year senior notes, the wire service added. Lehman Brothers Inc. and Goldman Sachs & Co. were the other joint lead managers for the $1.5 billion issued in 10-year senior notes.
The offering came under an existing shelf-registration statement, the Journal pointed out.”We’ve decided to launch this transaction today because interest rates and credit spreads are attractive,” said Lynn Wentworth, treasurer at BellSouth, during a conference call for investors, according to the paper. “And we believe the market will be highly receptive to our offering.”
Meanwhile, Wells Fargo & Co. raised $2.6 billion from a two-part offering led by Bear Stearns & Co. and Citigroup Global Markets Inc. It sold $1.75 billion in five-year notes and $850 million in 12-year notes, according to Reuters.
For its part, DaimlerChrysler North America Holding Corp., a unit of DaimlerChrysler AG, sold $1.5 billion of three-year floating-rate medium-term notes. Other issuers included Merrill Lynch, Freddie Mac, and Britain’s HBOS Treasury Services, according to the Journal.
The paper also reported that the Inter-American Development Bank was ready to trot out a $1 billion, 10-year offering, while Brazil’s state-owned oil giant Petroleo Brasileiro, also known as Petrobras, was expected to issue a $500 million, 10-year offering.
“It’s normal to see a pickup in issuance in September,” Cindy Cole, a fund manager at National City Investment Management Co. in Cleveland, told the Journal.
The spate of offerings came roughly two weeks before the Federal Reserve’s next policy meeting, scheduled for Sept. 21, when it is expected to raise interest rates for the third time since the end of June.
On Wednesday, Federal Reserve Chairman Alan Greenspan seemingly dispelled any notion that the Fed would hold off on hiking rates at that time when he told the House Budget Committee that the economy has “regained some traction” after hitting a “soft patch” in late spring.