$45 Billion in Two Days... Surge in US Corporate Bond Issuance

Hyundai Motor Also Issues $2.5 Billion
Purchases High-Grade Bonds Ahead of Interest Rate Cut

Companies are accelerating corporate bond issuance from the beginning of the new year to secure investors. The amount issued over two days reached $45 billion (approximately 59 trillion KRW).

According to major foreign media reports on the 3rd (local time), U.S. companies issued $29 billion (about 38 trillion KRW) in corporate bonds the previous day, followed by $16 billion (about 21 trillion KRW) in high-grade bonds on the same day.

On the 14th, an employee is organizing dollars at the Hana Bank Counterfeit Response Center in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

One of the major companies issuing corporate bonds that day was Hyundai Motor Company. It issued $2.5 billion (3.2765 trillion KRW) in corporate bonds. PacificCorp, a utility company owned by Berkshire Hathaway, the investment firm led by Warren Buffett, also issued bonds. The purpose was to raise $3.8 billion (about 4.9803 trillion KRW) to repay debts and settle claims related to wildfires in Oregon and Northern California. The French bank Cr?dit Agricole also issued $2.5 billion in bonds.

Scott Schulte, head of the investment-grade bond syndicate at Barclays, explained, "As investors begin injecting new capital in the new year, companies are taking advantage of the 'January effect.' The decline in Treasury yields at the end of last year was exaggerated, stemming from the belief that major economic indicators to be released later this week could show inflation-related surprises."

Investor demand for new bonds is also high. According to Informa Global Markets, bonds sold on the 2nd were oversubscribed by 2.83 times. According to a BMO Capital Markets report, $29.3 billion (about 38 trillion KRW) worth of bonds were sold on the 2nd, marking the largest amount since Labor Day last September.

Analysts and investors hold mixed views on the U.S. economic outlook. On one side, there is an optimistic forecast that the U.S. Federal Reserve's (Fed) interest rate cuts will lead the economy to a 'Goldilocks' scenario (high growth without inflation), resulting in a soft landing. On the other side, some expect a mild recession.

Investors are interpreted to be actively purchasing high-grade bonds to secure yields that would be unavailable once the Fed begins cutting rates. BMO Capital Markets forecasted that the amount of corporate bond issuance could increase further, considering that borrowers who previously refrained from entering the market may come forward.

This content was produced with the assistance of AI translation services.