Corporate Bond Sales Set a Record in May

U.S. companies sold a record $80.65 billion in investment-grade bonds in May, taking advantage of lower interest rates and strong investor demand, Thomson Financial Securities Data said Thursday.

The old record was $79.7 billion, set in January, Thomson said.

WorldCom Inc., the No. 2 U.S. long-distance phone company, was the biggest contributor to the record. On May 9 it sold $11.9 billion in bonds, largely to refinance older debt, in the largest bond sale ever from a U.S. company.

One reason issuance has been strong is that investors have been favoring higher-yielding corporate bonds over safer U.S. Treasuries.

Investors have felt more comfortable taking on credit risk because the Federal Reserve has been aggressively slashing short-term interest rates, hoping to spur a rebound in the economy by year’s end.

Buyers even have lined up for new high-risk junk bonds--despite soaring default rates on existing junk issues. Companies issued about $7 billion in junk bonds in May, according to Reuters data. Issuers included Station Casinos and cable TV giant Charter Communications.

Year to date, U.S. companies have issued more than $339 billion in investment-grade debt and $41 billion in junk bonds, Thomson said.