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At least 27 issuers tapped U.S. high-grade corporate bond

market

Tuesday

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Bond sales on track for roughly $60 billion week forecast

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High corporate bond sales pushed Treasury yields higher

By Matt Tracy

Sept 2 (Reuters) - U.S. corporate borrowers flocked to

the investment-grade bond market on Tuesday, seizing on

near-record tight borrowing costs and getting ahead of any

market volatility sparked by the Federal Reserve's interest rate

meeting later this month.

At least 27 issuers tapped the high-grade corporate bond

market on Tuesday, according to market participants -- the first

day of the Labor Day holiday-shortened week that is historically

the busiest of the year for high-grade bond market deal-making.

American pharmaceutical company Merck ( MRK ) turned to the bond

market for $5 billion to help fund its $10 billion buyout of

peer Verona Pharma announced on July 9. Bank

of America ( BAC ) led that financing, which consists of both

shorter- and longer-dated notes and bonds.

Another major bond sale announced Tuesday was health insurer

Cigna's ( CI ) $4 billion deal to refinance a soon-maturing term

loan and fund general corporate purposes. Citigroup ( C/PN ) led

that transaction.

Automakers Ford and Toyota ( TM ) were also among

those that announced bond sales.

All told, Tuesday tallied at least $40.8 billion in

high-grade corporate bond sales at market close, according to

Hans Mikkelsen, managing director of credit strategy at TD

Securities. This was just shy of the $43.2 billion issued the

day after Labor Day last year.

That puts the week on track to meet or exceed market

forecasts, which had pegged overall high-grade corporate bond

issuance at roughly $60 billion, according to several market

participants.

"The market was calling for a lot of issuance this week

coming off the holiday weekend," said Mike Sanders, head of

fixed income at Madison, Wisconsin-based Madison Investments.

TIGHT BOND SPREADS

Corporate bond spreads, or the premium over U.S. Treasuries paid

by companies to borrow, have hovered near all-time tight levels

in recent weeks. They last averaged 82 basis points (bps),

according to the ICE BofA Corporate Index, having increased from

a record 75 bp tight level reached on Aug. 15.

The flurry of corporate debt sales impacted prices in the

Treasury market too, as investors demanded higher returns to

make room for the new debt being sold, pushing Treasury prices

lower and yields higher.

The Merck ( MRK ) deal and others this week could mark the start of an

expected pick-up in M&A-related debt issuance for the remainder

of the year, market participants said.

"Those M&A financings have been coming back," said Piers

Ronan, head of investment-grade debt syndicate at Truist

Securities. "They're not the biggest deals ever but they're

going to lead to an overall boost in M&A-related numbers."

This week's expected issuance flurry comes ahead of the Fed's

widely-anticipated meeting from Sept. 16 to 17, where it is

expected to cut the fed funds rate by 25 bps.

"For deals that are on the margin, maybe that will bring

more ... to the market," said Putri Pascualy, client portfolio

manager for private credit at New York-based direct lender Man

Varagon.