Borrowing costs have surged globally as inflation fears climb. The average yield on a high-grade US corporate bond topped 6% this week for the first time since 2023, with risk premiums climbing to their highest in six months. Companies are struggling to place debt. Paramount Skydance Corp. sold about $50 billion of buyout debt, only to see much of it weaken within hours. Campbell's Co. and Bain Capital Credit LP's private credit fund also found lackluster demand. Brazil's MBRF Global Foods Co. SA delayed financings, and Multinational Mine Group shelved a five-year note sale. Only four borrowers tapped the US high-grade bond market this week, as Paramount's $30 billion offering dominated activity. Scott Kimball of Loop Capital Asset Management noted that messy new issuance performance and weak demand will likely underwhelm heading into year-end. Dennis Cinelli, Paramount's CFO, called initial declines "one-day choppiness," emphasizing the deal was meant to create a "next-generation entertainment and technology company." Annie Seelaus of R. Seelaus & Co. warned that big deals funding AI investments must go well to sustain market confidence. A Barclays report warns that fast selloffs in rates markets typically lead to credit weakness; when the 10-year US Treasury yield rises 40 basis points monthly, spreads typically widen shortly after. While higher yields could eventually draw rate-sensitive investors like pension funds, David Del Vecchio of PGIM Fixed Income says many prefer stability before deploying capital aggressively.
Paramount's debt weakening could scare off other companies planning new deals. The high-grade market is heavily dependent on jumbo transactions succeeding. For now, the pace of issuance is expected to slow further, with US investment-grade sales projected at around $100 billion this month, down from $132 billion last year and nearly $195 billion in September.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing