A month of $ 100 billion worth of high-quality U.S. bond sales is on deck


(Bloomberg) – Wall Street syndicate offices expect to see $ 90 billion to $ 100 billion in premium U.S. bond offerings in October, including up to $ 20 billion next week.

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That’s higher than the $ 80 billion set in October of last year and significantly more robust than the $ 68 billion in 2019, according to data compiled by Bloomberg.

Raising rates is a priority for issuers after the 10-year Treasury yield surpassed 1.5% this week. The belief that borrowing costs could continue to rise is likely to stimulate more issuance.

“The rise in interest rates has created a new urgency for issuers to lock in rates before they rise further, which could advance issuance plans for years to come,” the strategists wrote Thursday. of Bank of America Corp. led by Hans Mikkelsen. The first half of October tends to be slower for supply due to earnings-related issue blackouts, they added.

So far, credit markets have been largely immune to the volatility that has been shaking stocks of late. Barlcays Plc strategists expect this to remain the case until the end of the year.

“Credit markets have been tested but resilient in a volatile September for risky assets, with spreads tightening during the month amid high supply,” strategists led by Bradley Rogoff wrote on Friday. “At the start of the last quarter, we expect spreads to be primarily range related and returns to be primarily carry drag.”

High efficiency

A volume of US high yield bonds of $ 25 billion and $ 50 billion is expected in October, according to five Wall Street banks and research bureaus polled by Bloomberg. In leveraged loans, sales of $ 40 billion and $ 75 billion are projected, according to four of them.

About $ 44 billion in junk bonds and $ 55 billion in leveraged loans were sold in September, with debt buybacks – including the Medline Industries Inc. jumbo deal – fueling the supply.

The fourth quarter will begin with more loans financing M&A activity. A call to lenders is scheduled for October 6 for MKS Instruments Inc.’s $ 5.28 billion term loan to finance its acquisition of Atotech Ltd. The offer will include loans in dollars and euros. MKS Instruments manufactures equipment for the chip industry.

Meanwhile, Aggreko Plc, one of the world’s largest suppliers of portable generator sets, is selling around $ 1.35 billion in dollar, pound and euro loans to fund its acquisition by I Squared Capital & TDR Capital and to refinance existing debt.

After a busy September and a quick start in October to finance the buyout, the market could slow down at the end of the year.

Cade Thompson, partner in the capital markets group of KKR & Co., said there would not be a significant forward schedule for mergers and acquisitions / leveraged buyouts for the remainder of the year. Instead, expect to see new trades executed in 2022, he told a Bloomberg News conference on September 28.

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