Companies rush to US bond market as Trump rally cuts borrowing costs

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Corporate borrowers are rushing to tap the US bond market, taking advantage of “eye-poppingly” buoyant conditions after Donald Trump’s election victory.

Companies including heavy machinery maker Caterpillar, biopharma company Gilead Sciences and investment bank Goldman Sachs have raised more than $50bn this week, according to LSEG data.

That total is far above bankers’ expectations and the busiest week since a burst of activity in September, when companies typically return to the market after a summer lull.

Credit and equity markets have rallied since Trump’s win last week, pushing corporate borrowing costs relative to US Treasuries to their lowest level in decades, as investors bet that tax cuts will boost profits.

Companies are opting to “strike while the iron’s hot — and the iron’s really hot right now”, said John McAuley, Citigroup’s head of debt capital markets for North America. “There’s no question that the uncertainty that was looming around last week’s election was a weight on the market.”

US investment-grade bond spreads — the premium highly rated companies pay to borrow relative to the government — were at 0.8 percentage points late on Thursday, close to their lowest level since 1998. Spreads on high-yield or “junk” bonds sat at 2.6 percentage points — their narrowest point since mid-2007, according to Ice BofA data.

“Spreads are at these eye-poppingly tight levels,” said one senior debt banker, adding that low borrowing premiums were spurring many companies to “pull forward” bond issuance they had planned for early next year.

Banks, which typically move fastest to take advantage of tighter spreads, have featured heavily in this week’s borrowing spree.

Activity has been “very much skewed towards the financial side of the ledger”, said Teddy Hodgson, global co-head of investment-grade debt capital markets at Morgan Stanley. “It’s a lot of quick twitch activity that wasn’t planning on funding post-election, [but] that views this as too good to ignore in terms of where spreads are trading.”

Given the strength of markets, bankers expect a broader range of borrowers to follow.

“We expect to see significant volume,” said McAuley. “There are going to be busy days between now and mid-December . . . There is absolutely, across the board, pull forward of refinancing.”

The surge in US stock prices since election day has also spurred a flurry of activity in equity capital markets, with private equity firms and other investors selling down stakes in listed companies.

These so-called follow-on sales have raised about $6bn since the election, according to Dealogic data. That total is below the period shortly before the vote, which saw Boeing complete one of the largest such deals in history in late October, but the number of transactions has picked up pace, with November 7 and November 12 the two busiest days for follow-on sales since March.