Perhaps desperate times call for desperate capital moves. Companies sold a record amount of bonds this week — more than $40 billion worth of investment-grade and high-yield debt, according to Reuters. Bloomberg counted it closer to $43 billion.
Last week bond sales were $31.2 billion, and the weekly average so far this year is just $18 billion, Bloomberg noted.
Many of the companies that tapped the capital markets were looking to strengthen their balance sheets. Banks and securities firms sold 88 percent of the investment-grade debt this week, according to Bloomberg. In fact, financial companies were forced to accept the highest yields since May 2001.
“We’re seeing a race for capital,” Rizwan Hussain, director of credit research at Morgan Stanley, told Reuters. For example, on Tuesday Merrill Lynch sold $7 billion in debt, which Reuters said was the second-largest investment-grade sale this year, citing Dealogic. Altogether, the company raised $9.55 billion by issuing debt and preferred securities.
Citigroup sold $6 billion of hybrid bonds in its largest public debt offering, Bloomberg noted. Other investment banks that sold debt this week include UBS and Wachovia.
The average spread between investment-grade debt and Treasuries was 268 basis points. That was down 9 basis points from the previous week and the lowest since March 5, according to Bloomberg, citing Merrill Lynch index data. However, yields rose to 6.13 percent, the highest since August.