Rising yields trigger a chain reaction, as American companies may "race ahead" to issue bonds and lock in costs.

Wall Street traders have been preparing for US investment-grade corporate bond sales in September to potentially set a historical record, while recent rising yields could encourage blue-chip companies to issue bonds before financing costs increase further. Currently, the average yield on US investment-grade bonds has exceeded 5.5%, reaching its highest level in over two years. Tom Murphy, head of investment-grade credit at Columbia Threadneedle Investments, stated that the combination of rising yields and significant upcoming bond issuances in the technology sector may prompt companies to lock in current borrowing costs. If I were a CFO or finance director with financing needs in 2027, I would likely move my bond issuance plan up to 2026, Murphy said. The risk of waiting is that US government bond yields may continue to rise, and the credit spread of corporate bonds relative to US Treasuries may widen, further increasing corporate financing costs. Data shows that corporate bond spreads remain relatively low, averaging below 0.8 percentage points for most of this week. Mizuhos head of US investment-grade debt capital markets, Moshe Tuchfeld, remarked, Although interest rates are high, we are currently in a situation that is almost a case of 'the lesser of two evils' youd rather issue bonds while credit spreads are still relatively small than wait and risk supply increases in the second half of the year impacting valuations. September's corporate bond issuance in the US could break records, with Wall Street forecasting up to $250 billion. A previous survey indicated that traders expect Septembers US investment-grade bond issuance to be around $215 billion, surpassing the historical peak record of $207.5 billion set last September. Some Wall Street traders even predict the issuance could reach $250 billion. In the first eight months of 2026, half of the months (or four months) saw investment-grade bond supply set monthly records, with the last three months being particularly notable, as total issuances are currently 7.6% higher than the same period in 2020. Due to the impact of the pandemic, the total issuance in 2020 was approximately $17.5 trillion, marking an all-time annual record. Global public syndicate bond sales have continued to maintain record growth rates. One of the factors driving growth in the US primary market is financing by technology companies for investments in artificial intelligence. Given the expected trillions of dollars in AI-related spending, this growth momentum is likely to continue. Meanwhile, global bond yields have reached their highest levels since 2008, and what has traditionally been a seasonal lull in the debt market over the past few weeks has proven to be unusually active. In the European market, activity picked up again after the mid-August summer lull, marking the busiest start on record, with issuance exceeding 40 billion (approximately $46 billion) for three consecutive weeks thereafter. As of Wednesday, the issuance of US investment-grade bonds stood at $8.3 billion, marking the highest level at least since the week prior to Labor Day in 2019. However, on the flip side of the supply surge, signs of weakening demand from investors have become apparent in August. Leslie Paisley, a portfolio manager with MacKay Shields global fixed income team, stated, We believe that maintaining caution and discipline in this historic wave of bond issuance, particularly in selection and requiring reasonable compensation, is necessary, especially in the short term. Nevertheless, not all Wall Street institutions are convinced that September will usher in a wave of bond issuance. Bank of America strategists Yuri Seliger and Suhane "Mary" Lee pointed out this week that many large technology companies may choose to wait in September after completing extensive bond issuances in recent months. Bank of America expects September investment-grade issuance to be around $190 billion; even so, it would still become the second-highest issuance for the month in history. CreditSights noted in a recent report that some buy-side investors may ultimately face issues with portfolio concentration limits. Investment-grade buyers typically allow their fund managers to invest up to 3% to 5% of assets in bonds from a single company. Although mega tech companies like Alphabet and Amazon have issued bonds this year, each accounts for less than 3% of the Bloomberg US High-Grade Corporate Bond Index.