Seventeen companies flood US bond market ahead of Fed meeting

By Matt Tracy and Shankar Ramakrishnan

WASHINGTON, May 6 (Reuters) - The U.S. corporate bond markets were flooded by 17 bond offerings on Tuesday as companies looked to take advantage of a sharp tightening in credit spreads and avoid any market volatility after the U.S. Federal Reserve's rate decision meeting that ends Wednesday.

Coffee retailer Starbucks (SBUX), Deutsche Bank , Biogen, and Host Hotels & Resorts (HST) were among the 17 borrowers that issued bonds on Tuesday.

They followed nine others that included Apple (AAPL), Comcast (CMCSA) and General Motors (GM) on Monday and collectively all these companies raised over $39 billion this week, already exceeding bond syndicate estimates of an average $35 billion of new bond supply for the week, bankers said.

WHY IT MATTERS

The deluge comes as investment-grade credit spreads, or the premium companies pay over Treasuries, tightened sharply from peak levels touched following Trump's April 2 'Liberation Day' tariffs.

BY THE NUMBERS

High-grade credit spreads closed Monday at 105 basis points compared to a peak 121 bps touched on April 7. Junk bond spreads, meanwhile, last stood at 360 bps after hitting a peak of 461 bps on April 7, according to ICE BofA data.

MARKET REACTION

--"The decision to come to market now for many of these companies is arguably a sign that corporations are looking to take advantage of the strong market technical that currently exists," said Scott Schulte, global co-head of investment-grade syndicate at Barclays. "The tight level of credit spreads...clearly are not appropriately pricing in the full impact of the tariff war on longer-term corporate fundamentals."

--"There is uncertainty around rates and the economy. Recession risks are elevated, and we're all trying to figure out what the relationship is between the hard data and soft data," said Jack McIntyre, portfolio manager at asset manager Brandywine Global.

--"We see some uncertainty with tomorrow and Powell's comments," said Sam Millette, director of fixed income at Commonwealth Financial Network, referring to any potential market volatility in the immediate aftermath of Fed chair Jerome Powell's comments about tariffs and inflation on Wednesday.

"If it's going to be a transitory situation, I think markets are going to be pretty happy with that. If it is going to be a tone of persistent inflation, then spreads are likely to move wider," he added. (Reporting by Matt Tracy and Shankar Ramakrishnan; editing by Edward Tobin)