By now it is no secret that September kicked off with record U.S. corporate borrowing, driven in part by ultralow rates.
But the dash to issue debt early this September has come also as highly rated companies look to avoid central-bank surprises and dodge potential jolts sparked by President Donald Trump’s Twitter account.
“It speaks to the fact that volatility is real high and the narrative can change overnight based on a tweet,” said Jody Lurie, corporate credit analyst at Janney Montgomery Scott, in an interview with MarketWatch, of the rush of corporate borrowings.
“When they get the green light, they are not going to hesitate.”
Investment-grade U.S. corporations issued a record $90.4 billion of bonds in the first week of September, making it the busiest borrowing week ever in the sector, since Dealogic started tracking issuance 24 years ago.
The strongest borrowers of the batch, including Apple Inc. AAPL, -0.23%, issued 30-year bonds while paying investors yields of less than 3%.
Ongoing borrowing this week brought the monthly high-grade corporate debt tally closer to Bank of America Merrill Lynch’s $120 billion to $130 billion issuance forecast for the month, even with a full two weeks still left on the calendar.
Kraft Heinz Foods Co KHC, -0.85% joined a handful of BBB-rated companies, with ratings on the cusp of high-yield, that tapped the bond market on Wednesday to borrow $5.7 billion, according to BAML data.
Corporate borrowing even kept pace through Thursday’s European Central Bank’s policy meeting, which resulted in deposit interest rates being cut deeper into negative territory and a restart of monthly bond purchases.
In the high-yield bond market, Uber Technologies Inc. UBER, +0.21% said Thursday it raised $1.2 billion through an eight-year debt offering that increased from an initial size of $750 million, a sign of market confidence in the ride-hailing company after its shares have tumbled 18% since its May IPO.
Meanwhile, bankers said corporate borrowers have been focused on tweets, tariffs and benchmark rates.
The 10-year Treasury note yield TMUBMUSD10Y, -0.10% has been climbing in recent sessions, with Thursday seeing it touch a nearly six-week high of 1.723%. Bond prices move in the opposite direction as yields. Because corporate bonds also price at a premium over risk-free Treasurys, upswings in the benchmark can lead to higher borrowing costs.
Still, negative yields elsewhere have been a boon for U.S. high-grade borrowers.
“I think what’s keeping the market hungry is the collapsing of foreign yields,” said David Knutson, head of Schroder’s U.S. credit research, Americas.
“We can wince all we want about high-yield bonds at around 1% in Europe, but if you made promises to return a certain yield to investors, you’re getting forced in.”
Scott Kimball, senior portfolio manager at Taplin, Canida and Habacht, a part of BMO Global Asset Management, said corporate borrowers likely had little to gain by holding off to borrow until after the Sept. 17-18 Fed meetings, when benchmark rates could go lower yet.
“You’d be kind of splitting hairs,” he told MarketWatch, noting that most of the Treasury yield curve currently resides below 2%. The other factor, he said, was that Fed officials have given the market mixed signals about whether additional benchmark rate cuts are necessary.
Trump on Thursday used tweets to complain that the latest ECB stimulus was designed to depreciate the euro and hurt U.S. exports. In a separate message, Trump also said China was expected to be buying “large amounts of our agricultural products.”
Renewed trade optimism on Thursday helped the Dow Jones Industrial Average DJIA, +0.17% mark its longest win streak in more than a year, while pushing higher the S&P 500 SPX, +0.29% and Nasdaq Composite Index COMP, +0.30%
Trump’s social-media habits have left Wall Street looking for ways to parse how markets react to his tweets.
J.P. Morgan recently created a “Volfefe” index, a nod to a Trump’s “covfefe” typo from two years ago, with the aim of tracking what impact his digital messages have on U.S. rates.
While U.S. corporations could benefit from the lower rates Trump has tweeted at the Fed to make, heads of business also have been feeling the sting as he blasts off messages.
In the past six months, executives at the helm of companies ranging from shoe-seller Designer Brands Inc. DBI, -0.94% to manufacturing company Spectrum Brands Inc. SPB, +0.61% to chip maker Microchip Technology Inc. MCHP, +0.05% each said Oval Office tweets had an impact on business strategy, earning expectations or borrowing habits, according to a MarketWatch review of earnings calls during that period.
Real estate mogul Barry Sternlicht, the CEO of Starwood Property Trust STWD, +0.21%, also said that “the trade wars fought at 4 a.m. with tweets” has put businesses on edge and increased the odds of a U.S. downturn, during his company’s Aug. 7 earnings call.
“I think it erodes confidence,” Sternlicht said. “All they have to do is slow down the investment and you have recessions [or] at least a significant slowdown.”