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We’re past halloween with the holidays fast approaching and issuers are sprinting to the bond market while there are still open weeks.

Borrowers piled on another $58.5bn of supply this week following a $77bn week to end October. That’s more than $135bn in two weeks, which would surpass the volume of five other full months this year.

The supply surge has largely been driven by tech as Meta and Alphabet each came with a jumbo bond package to fund AI and data center investments. We went in depth this week on how much more AI-related supply to expect from the major tech companies in the coming months and years and they might not be done for the year.

“The data center boom is significant, and the hyperscalers there are looking to the corporate market to start to help finance that,” one portfolio manager said. “We've seen some big deals recently, and I would expect that to continue as we round out the rest of this year and into next year.”

All that supply started to move index spreads wider, in part because tech issuers were offering higher concessions to get the size they desired. But as we covered this week, spreads have rebounded from a down day on Tuesday to bring more borrowers back to the primary to close out the week.

That pickup on the week was a strong show of force for new IG bonds despite the slight bit of indigestion.

“It didn't derail the market like what happened with that $49bn Verizon trade, where everything stopped around it and everybody got afraid,” one syndicate banker said. “You had a day where you had 13 issuers in the market on the same day that Google's banging out $17.5bn — so the days of fear of competing with the massive transactions, I think those days are gone."

t’s not all about tech

A $6bn deal from Swiss pharmaceutical company Novartis went somewhat under the radar on Monday in the shadow of the Alphabet deal.

The seven-part trade was the latest in a string of pharmaceutical deals to hit the market in recent months. Roughly half of this year’s $76bn of pharma bond supply has priced since August in what has been a down year for the sector overall, according to 9fin data. The market is unlikely to get close to the $120bn of supply from last year.

Novartis (rated Aa3/AA-) priced a little wide of where French pharmaceutical company Sanofi (Aa3/AA) priced last week. For example, Novartis’ 2032s priced at Treasuries plus 50bps, which is wide of where Sanofi’s comparable 2032s priced at T+45bps.

However, Novartis offered investors more duration with tranches extending to 2035, 2045 and 2055. There was enough demand at the long end that the company didn’t have to pay to extend from 10 years to 20 as both tranches priced at T+55bps.

Proceeds were marked for GCP but sources said the deal was seen as funding for the company’s $12bn buyout of Avidity and it’s smaller $1.4bn acquisition of Tourmaline Bio.

The 10-year Treasury benchmark fell to around 4% last week from highs of around 4.7% earlier in the year, and even though it has since widened out again by 10bps or so the lower yields may be bringing out more M&A supply.

“Now that we've gotten down to Treasuries of around 4% you see a pickup in M&A and so I think there is a corresponding pickup in issuance to fund it,” the syndicate banker said. “You're going to continue to see that as long as we can kind of hover around this 4%.”

Global Payments added to the M&A supply with a $6.95bn four-part bond to fund its $24.25bn acquisition of Worldpay from Fidelity National Information Services (FIS) and private equity firm GTCR.

FIS first bought Worldpay for $35bn in 2019 to get a foothold into the fast growing personal digital payments space. Six years later the company is being sold again as the companies pivot back merchant services for big business accounts.

Rating agencies maintained their Baa3/BBB-/BBB ratings on Global Payments and said the company is on track to meet its merchant services revenue and cash flow guidance to support its 3.5x leverage metrics.

More to come

Next week should be a little more tame with Veterans Day shutting down markets on Tuesday, but still desks are expecting around $30bn–$45bn of supply.

Despite all the supply even smaller issuers have performed well.

Toys and games maker Mattel issued its first investment grade bonds since getting upgraded back into the asset class earlier this year. The company’s financials have improved substantially since the release of the Barbie movie in 2023 to where it’s back in the IG market with Baa3/BBB/BBB- ratings for the first time since 2016.

Mattel’s $600m SUNs due 2030 priced at T+130 for a yield of 5.06%, but because of the higher rate environment those notes are actually higher yielding that then 3.375% SUNs due 2026 the company is repaying, which were issued when it was a high-yield rated company.

On the other end of the ratings band, Shell (Aa2/A+/AA-) returned to the market after a four-year absence to consolidate its debt under its new US issuing entity. We have all the details here.

Powersports manufacturer Polaris issued $500m SUNs due 2031 to repay a term loan. It was the company’s first bond since getting downgraded to the lowest rung of investment grade by both S&P and Fitch earlier this year (Moody’s already had the ATV maker at Baa3).

But Polaris did have to pay up for the deal. It priced $500m SUNs due 2031 at T+185bps, which is about 66bps wide of where its outstanding 2029s were trading in the secondary the day prior, according to ICE Vantage data.

Even so, the yield on the new notes comes in at 5.615%, which is still significantly lower than the 7.178% 2029s.

“Whether you're a spread funder or a coupon funder looking at your all-in cost of funding, it's an incredibly attractive environment,” one sell-sider said. “The combination of a Goldilocks funding environment, very strong demand from the investor base, huge amounts of cash in investment grade, and stellar funding conditions has really encouraged issuers to pull forward issuance.”