High-grade corporate bond sales in the US this year have reached remarkable heights. As companies seize the opportunity of relatively affordable borrowing costs, the volume of these sales has climbed to the second-highest level on record. Bloomberg News data shows that blue-chip companies have sold an astonishing $1.417 trillion of high-grade bonds this year, surpassing the $1.411 trillion sold in 2021 before the Federal Reserve began raising interest rates to combat inflation. The record for issuance was an astounding $1.75 trillion in 2020 when the US central bank cut rates to zero to stimulate the economy during the pandemic.

Benefits of Current Bond Market Conditions

The average yield on a high-grade company bond was 5.25% on Friday, according to Bloomberg index data. This is slightly below the mean for the high-grade index since mid-2022 when the Fed's rate hiking campaign was just getting underway. Companies have a limited window of time left to sell bonds this year before markets slow down around US Thanksgiving and December holidays like Christmas. This presents a crucial opportunity for them to secure financing at relatively favorable rates.There are factors on the horizon that could potentially impact borrowing costs in 2025. For instance, President-elect Donald Trump's inauguration and the implementation of policies such as tariffs could lead to an increase in inflation. However, another significant factor driving issuance is the decline in risk premiums or spreads, which have fallen to close to their lowest levels in a quarter century. This allows companies to borrow relatively cheaply compared to Treasuries, providing them with a cost-effective financing option."Scott Kimball, chief investment officer at Loop Capital Asset Management, emphasizes the importance of this time period. 'The window of time before the holidays begin is narrowing quickly. Market sentiment is decent, rates have stabilized and credit spreads are still near their multi-year tights,' he says. This indicates that companies need to act swiftly to take advantage of the current market conditions."

Monday's Bond Market Activity

On Monday, nine companies tapped the US investment-grade bond market, selling more than $11 billion of notes. Morgan Stanley sold $3 billion of bonds maturing in 31 years, demonstrating the strong demand for long-term debt. General Mills Inc., known for its popular cereal brands like Cheerios, raised funds for its acquisition of the North American unit of Whitebridge Pet Brands. Syndicate desks are expecting $20 billion to $25 billion of issuance this week, highlighting the continued activity in the bond market.READ: IG ANALYSIS: Morgan Stanley Leads; 2024 Grabs 2nd Spot All Time

The Leveraged Loan Market

The debt binge is not confined to just investment-grade bonds. In the leveraged loan market, 17 issuers launched offerings totaling $31.5 billion on Monday. This adds to an already bustling year as borrowers seek to refinance and reprice their existing loans. The availability of funds in the leveraged loan market provides additional options for companies looking to meet their financing needs. It showcases the diverse range of opportunities available in the debt market and the continued appetite for borrowing among various entities.©2024 Bloomberg L.P.