US corporate-bond sales pass US$1 trillion in record pace

WASHINGTON (BLOOMBERG) - Blue-chip companies have just sold more than US$1 trillion (S$1.34 trillion) of bonds for the fifth year in a row - and they got there quicker than ever.

Issuance has boomed as companies from Apple to Exxon Mobil rushed to take advantage of borrowing costs near record lows. And investors have flocked to the debt to escape US$11.7 trillion of bonds elsewhere that are trading at negative yields thanks to unprecedented stimulus from central bankers outside the US.

Investment-grade bond sales exceeded US$1 trillion on Wednesday after companies including Royal Dutch Shell issued more than US$20 billion of bonds. At this pace, issuance may soar past the record US$1.32 trillion of bonds sold in all of 2015.

"We've seen a tremendous amount of influx of capital from around the world into our market, enhancing the ability of companies to raise large sums of money," said Andrew Karp, co- head of Americas investment-grade capital markets at Bank of America, the biggest underwriter of corporate bonds globally this year.

The year's largest sales have come from Anheuser-Busch InBev NV, Dell Inc. and Microsoft Corp., which tapped debt markets for a total of US $85.75 billion to finance acquisitions. That's helped sales hit the $1 trillion mark faster than in any of the four previous years.

"We keep getting larger and larger deal sizes," said Greg Nassour, co-head of investment-grade portfolio management at Vanguard Group, which manages more than $3 trillion. "The story is going to continue. Central bank stimulus along with people trying to put money to work and get a little bit of yield is still going to dominate longer term." Borrowing costs remain near year-to-date lows for the companies, having got cheaper in the past seven months.

US investment-grade bonds offer an average of 1.37 percentage points of extra yield over safer Treasuries, according to Bloomberg Barclays Index data, fueling the sales.

"The demand for income is bigger than anything I've ever seen before," said Rick Rieder, global chief investment officer of fixed income at BlackRock.