Rising yields seen pushing companies to sell bonds sooner

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Photo by Michael Nagle/BloombergWall Street dealers were already bracing for a potential record in September for high-grade United States corporate bond sales, and recent surging yields may give the blue-chip companies even more reason to borrow now before funding costs rise further.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountAverage yields for U.S. high-grade notes are above 5.5 per cent, hitting levels not seen in more than two years. Higher yields and future heavy tech-sector issuance may spur companies to lock in current borrowing costs now, according to Tom Murphy, head of investment-grade credit at Columbia Threadneedle Investments.“Boy, if I was a CFO or treasurer and had something to do in 2027, I’d probably pull it forward into 2026,” Murphy said.Canada's best source for investing news, analysis and insight.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Investor will soon be in your inbox.We encountered an issue signing you up. Please try againThe risk of waiting is that government bond yields will keep rising, and corporate debt will weaken relative to U.S. Treasuries, pushing borrowing costs for companies even higher. Spreads for corporate bonds are still at relatively low levels, hovering below 0.8 percentage point for much of this week on average, according to a Bloomberg index.“Despite higher interest rates, it’s almost like a ‘the devil you know’ type of situation where you’d rather issue now with credit spreads still relatively tight than wait, risking that more supply later in the year could impact valuations,” said Moshe Tomkiewicz, head of investment-grade debt capital markets at Mizuho Americas.Dealers forecasted about US$215 billion of U.S. high-grade bond sales for September, according to an informal poll by Bloomberg News. The month’s record was set last year at US$207.5 billion. There are some Wall Street predictions, though, for issuance to potentially reach US$250 billion.Investment-grade supply has set records in half of 2026’s eight months, including the past three, and volume is tracking 7.6 per cent above 2020 levels. Then, pandemic-fuelled issuance reached about US$1.75 billion for the year, an annual record.Global sales of publicly syndicated bonds have been at a record pace throughout. Helping fuel U.S. primary markets has been technology companies raising funds for investments in artificial intelligence. Such volume is liable to just keep rising given the tens of trillions of dollars in AI-related spending that is projected.Meanwhile, what’s often a seasonally quiet period for debt markets has been uncharacteristically active the past few weeks as global bond yields reached levels not seen since 2008.This is the third consecutive week that sales in Europe have topped the equivalent of about US$46 billion, after mid-August kicked off with the busiest-ever restart following the summer lull there. Meanwhile, U.S. high-grade sales at US$8.3 billion through Wednesday are the highest for the week before the Labour Day holiday since at least 2019.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The flip side of heavy supply, however, is that investor appetites showed signs of fading last month.“We think caution and discipline in terms of being selective and demanding proper compensation are warranted, especially in the near term, as we manage and navigate through this historic wave of debt issuance,” said Lesya Paisley, a portfolio manager on the global fixed income team at MacKay Shields.Not everyone on Wall Street is convinced that this month will see heavy bond sales. Bank of America Corp. strategists Yuri Seliger and Sohyun Marie Lee wrote this week that many big tech companies may sit out September after jumbo-sized deals in recent months.They forecast about US$190 billion of high-grade issuance overall, but even at that level sales would be the month’s second-most ever.Research firm CreditSights said in a recent note that some buyers could eventually run up against concentration limits in their portfolios. Investment-grade investors typically allow their money managers to keep as much as three per cent to five per cent of assets in a single company’s bonds.Hyperscalers including Alphabet Inc. and Amazon.com Inc. individually consist of much less than three per cent of the Bloomberg U.S. high-grade corporate bond index despite their issuance this year.We apologize, but this video has failed to load.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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