The market for corporate debt issuers has been very tricky given the extreme volatility markets have experienced since the start of 2016, with the value of new debt issues in Australia so far this year among the lowest in recent years.
The same can be said for US debt markets but this week a few high quality borrowers have tested market appetite with some major bond issues. Apple, IBM and Toyota, three of the highest quality corporations in the US, have raised over USD$23 billion.
Apple raised USD$12 billion, IBM USD$5 billion and Toyota USD$1.75 billion. Like Australia, credit spreads in the US have been blowing out as investors flock to the higher security of sovereign debt. Lower rated issuers have shied away from testing the market and so the emergence of high quality issuers has been welcomed by investors and borrowers as a way of setting the tone and market sentiment. Historically, the quality issuers are the first to re-enter markets after bouts of volatility.
Apple’s USD$12 billion issue comprised nine tranches with maturity dates as early as 2 years and as long as 30 years. The bonds were a mix of fixed and floating, attracted bids as much as USD$28 billion and will fund Apple’s share buyback programme.
Despite spreads moving wider overall, the strong rally in government bonds means issuers are still raising capital at historically cheap levels.