Still wondering if the credit crisis is easing?
The torrid new issues market for investment-grade corporate bonds already has set a monthly record — just two-thirds of the way through May.
According to Reuters, through Monday night $114 billion in investment-grade debt had been sold, a bit short of the record monthly total of $117 billion in April, the wire service said, citing data from Bank of America.
Then on Tuesday, Bank of America sold $2.7 billion in preferred shares and American Express Credit sold $900 million in bonds, pushing May’s volume comfortably to the new monthly record, according to the wire service. The size of the AmEx deal was increased from the originally planned $800 million.
Reuters cited a variety of reasons for the issuance surge, including stable market conditions, lower borrowing costs, and the ability of huge financial institutions to raise billions of dollars of capital to shore up balance sheets after taking large write-offs.
“Even though you’ve seen weakness in the credit markets and extremely wide spreads, the interest rates are so low it’s really been a very attractive time for corporations to go out and finance themselves,” Hans Mikkelsen, analyst at Bank of America, told the wire service.
The average yield on an investment-grade bond is currently 5.62 percent, Reuters reported.
Meanwhile, two more companies sold junk debt on Tuesday.
EchoStar DBS Corp., a subsidiary of DISH Network Corp., sold $750 million of seven-year senior notes, up from the originally planned $500 million. And Chesapeake Energy Corp., an independent oil and gas producer, sold $800 million of 10.5-year senior notes, up from the originally planned $500 million.