By Andrea Johnson
Nov 5 (IFR) - The US high-grade bond market set the one-day
record for dollar volume on Monday, as issuers sold $22.1
billion of debt on the eve of one of the tightest presidential
elections in memory.
The day's tally included the single biggest debt sale in US
corporate investment-grade history, a $14.7 billion deal from
pharmaceuticals giant Abbott.
The surge of trades spoke to an unusual confluence of
factors - last week's devastating mega-storm, historically low
interest rates, and market trepidation ahead of Tuesday's vote.
The market has seen a whopping $47.45 billion in debt sold
in three business days, with companies moving swiftly to drum up
new financing ahead of the knife-edge election.
Presidential elections almost always have a strong effect on
the credit and equities markets. The Dow lost 5% the day after
Obama's 2008 win.
But with interest rates still being kept low by the Federal
Reserve to try to counteract the effects of the 2007-08
financial crisis, companies have been selling new debt at a
furious pace in 2012, much of it to finance older and more
expensive outstanding obligations.
"From an issuer's point of view, the mood of the buy side is
so good, and coupons so low, that it's a case of just issuing
now and asking questions later," Michael Collins, a senior
investment manager at Prudential, told IFR.
"That's part of the mentality that is driving the new issue
market at the moment, and another part of it is getting some
capital raising done ahead of the fiscal cliff."
How to cope with the so-called fiscal cliff - the nexus of
tax and spending cuts looming when 2013 begins - is one of the
many issues in play in Tuesday's showdown between President
Barack Obama and challenger Mitt Romney.
Many analysts said the rush of deals on Monday was to be
expected before the vote, which polls show could be one of the
closest-ever battles for the White House.
"Corporates want to complete their funding plans ahead of
the uncertainties presented by the presidential election and the
fiscal cliff," said Edward Marrinan, head of macro credit
strategy at RBS.
Monday's record was driven by Abbott, which came to
market with the biggest high-grade corporate deal in US history
to facilitate its decision to split into two entities.
"With a deal of this size they could not afford to wait
until after the election to get it done," said one corporate
"Whichever way the election goes, it will have an effect."
According to Thomson Reuters/IFR data, the previous one-day
record in the US high-grade corporate debt market was $18.95
billion set on Sept 12 of this year.