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After a pause, US capital markets have fired back up.
Companies returned to US debt markets on Tuesday to borrow more than $10bn as volatility retreated and the overall market tone improved, ending a brief drought when borrowers were sidelined.
More than half a dozen groups issued debt on Tuesday to raise $10.9bn, including a $4.65bn bond offering from Rockwell Collins, the US manufacturer of electronics for aircraft cockpits, and a $2.2bn sale from semiconductor group Applied Materials.
Investors placed orders of $15bn with underwriters for a piece of the Rockwell Collins deal, one investor briefed on the sale said. The US company will use the proceeds to fund its acquisition of B/E Aerospace.
The group was accompanied by US automaker Ford, which borrowed $1.75bn, and retailer Dollar General, which raised $600m in fresh financing. Keysight Technologies, Omega Healthcare Investors and Oklahoma Gas and Electric also issued new bonds on Tuesday.
The sales have buoyed activity in US debt markets to record levels, with issuance of investment grade corporate and bank bonds in the US nearing $400bn so far this year, Dealogic data show. The figure puts the market on track for its largest quarter of all time.
Investors across the globe have been attracted to the higher yields on US corporate bonds, as more than $10tn of debt trades with a yield below zero. Investment grade US corporate credit yields 3.31 per cent by contrast, according to Bank of America Merrill Lynch.
The raft of bond offerings has nonetheless started to sap enthusiasm for new debt recently, with the premium investors demand to own high quality paper rising from a two year low set at the start of March.
“Supply is weighing on the market a little bit but every deal that comes is met with demand,” said Matt Brill, a portfolio manager with Invesco. “While the deals may not be performing as well as they were earlier this year, no deal has struggled to get done.”
Last week sales of new bonds came to a halt as the stock markets weakened and volatility rose, with bankers warning clients against launching sales before a vote on healthcare reform in Washington. The “market blip”, as one banker characterised it, has for the moment subsided. US stocks rose on Tuesday while the CBOE’s Vix volatility index declined.
Mr Brill added: “You would think that given some of the softness that a few deals would have trouble getting done, but that hasn’t been the case.”