Tasos Vossos, Ronan Martin and Josyana Joshua
4 min read
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(Bloomberg) -- Companies in the US and Europe cautiously waded into credit markets, launching a series of debt sales as they looked to lock in relatively low borrowing costs and before retaliation from Iran jolts bond yields.
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In the US, six companies, including computer chip-maker Marvell Technology Inc., are electing to sell debt in the investment-grade market on Monday. A dozen corporations launched sales of leveraged loans, a brisk pace in line with recent Mondays. Eight issuers sold high-grade notes in Europe.
Sales in Europe came after early morning conversations between bankers and company officials, commonly referred to as go-no-go calls, where they discussed whether to wait in case they are blindsided by an Iranian response or to proceed with sales, according to people familiar with the matter, who asked not to be identified. Deal announcements then came later than usual, they added.
The decision by borrowers to sell debt underscores the muted reaction so far in global markets to the bombings in Iran, with indicators of credit risk still hovering within their recent trading ranges. Iran launched missiles at a US air base in Qatar, which were intercepted with no casualties, according to Qatar. The Islamic nation’s retaliation efforts could potentially push US government bond yields higher, particularly if Tehran disrupts shipping traffic through the Strait of Hormuz, a crucial passage for global oil and gas cargoes, a move that could hit the global economy.
But for now, investors have cash and are willing to buy, helping to spur bond sales. US Treasury yields had fallen for the day even amid reports of retaliation, and have declined about 13 basis points since last Monday’s close, keeping financing costs relatively affordable for many issuers.
“Even as uncertainty remains a defining factor in markets, borrowing costs have come down for both spread and coupon issuers, leaving companies with still attractive financing prospects,” said Winifred Cisar, global head of strategy at CreditSights Inc.
There were signs of investors growing more cautious on Monday. Three companies stood down from selling high-grade bonds in the US, and might look to sell on Tuesday instead. Gauges of US corporate credit risk showed rising fear.
“With the end of the quarter looming, second quarter earnings season ramping up in a few weeks and no definitive direction for the Fed or key economic data, credit investors are being more selective in how and when they put incremental capital to work,” Cisar said.
