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(Bloomberg) -- A handful of companies have held back on selling high-grade corporate bonds in the US after yields have climbed in the last week close to their highest levels since the middle of last year, boosting potential borrowing costs.
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Sales have generally been relatively active in the first few trading days of January, but at least one company opted to stand down from issuing high-grade bonds Wednesday, according to Bloomberg News strategist Brian Smith. A handful of other borrowers chose to put off their deals until next week, Smith wrote.
They’re delaying sales as borrowing costs have edged higher recently. The average yield on a US high-grade corporate bond was 5.41% at Wednesday’s close, hovering around its highest level since July and up from 5.33% at the end of last year.
“Companies may wait on a better entry point with yields well above month-ago levels,” Bloomberg Intelligence analyst Noel Hebert said. “If we think about where rates are today and upcoming economic data with payrolls and CPI, you probably have more downside than upside to yields, particularly as further rate cuts remain the default in Federal Reserve communications.”
But that hasn’t stopped many companies from borrowing in the high-grade market. In the first three days of the week, companies sold about $60 billion of investment-grade notes, with issuance mainly coming from utilities and financial corporations, including banks. The total for the year through Wednesday so far is about $76 billion, slightly ahead of the total for the same period last year.
An informal survey of debt underwriters last month found forecasts of $175 billion to $200 billion for January, compared with a record $190 billion for the first month of last year. At least four other sales are teed up for the coming days, including a possible offering from Hyundai Capital Services.
Day of Mourning
In the leveraged loan market, there is only one lender call scheduled, for NielsenIQ’s dual-currency refinancing. Commitments are due on one deal Thursday in the US leveraged loan market.
Capital markets activity was broadly slower on Thursday because bond markets are closing early for the national day of mourning for Jimmy Carter. There’s also an employment report set to release Friday, which could have a big impact on yields.