7 Soft Weeks for Bonds

Last week's $24 billion in new corporate bond issues marked the first time in seven weeks that new issues have topped $20 billion. But even $24 billion is a pretty soft number. I don't think it's a coincidence that the drop-off in new issues matches up with the increase in bond rates that started in May. Here's a summary of the borrowing.

Banks operating outside the U.S. accounted for $7.8 billion of the total. As is typical for banks, there wasn't much detail on uses for the money.

Source: Reuters.

General Electric's capital Corporation threw the switch on $3.5 billion spread over two- and three-year issues. The SEC filings didn't have any details on the use of proceeds.

Oracle (ORCL -0.77%) sold 5.5- and 10-year notes totaling $3 billion. According to the SEC filing, the money will be going toward "general corporate purposes, which may include stock repurchases, payment of cash dividends on our common stock and future acquisitions." An interesting point here is that Oracle's latest quarterly report shows more than $10 billion in net cash, so it didn't need to borrow.

Realty Income (O 0.34%) leased $750 million for 10 years. The money will be used repay the company's acquisition credit facility. Realty Income is a Real Estate Investment Trust that pays monthly dividends.

Specialty metals producer Allegheny Technologies (ATI -1.53%) rolled out $500 million in 10-year paper. The money will be used for "general corporate purposes, which may include repurchases, repayment or refinancing of debt, capital expenditures, additions to working capital, the financing of future acquisitions or strategic combinations." It's good to see that's nailed down.

Best Buy (BBY -1.56%) liked the number five last week, issuing $500 million in five-year, 5% notes. The new money will be used to redeem $500 million of 6.75% paper maturing this month. The new, lower-rate paper will save the electronics retailer about $8.75 million per year in debt service.

It's impossible to know whether the slowdown in corporate bond issues owes to the rise in rates or just noise. These are still historically low rates, and if company managements thought the climb were set to continue, I'd expect a scramble to borrow money now, rather than later when it's more expensive. That clearly isn't happening.