Pfizer borrows $31 billion in mega bond deal as debt issuance picks up ahead of debt-ceiling deadline

Pricing on the bonds, rated A1 by Moody’s Investors Service, narrowed about 20 basis points from initial expectations, with the $5 billion class of 10-year bonds clearing at a spread of 125 basis points above the risk-free Treasury rate TMUBMUSD10Y, 3.756%, or a yield of about 4.7%, according to a person with direct knowledge of the dealings.

Bankers initially pitched the bonds to investors at a range of Treasurys plus 145 basis points, according to CreditSights. Lower spreads mean investors receive less compensation.

The bond deal ranks as the fourth-largest on record for the U.S. investment-grade corporate bond market, according to data from Informa Global Markets.

Analysts at BofA Global this week noted an uptick in U.S. investment-grade corporate bond supply, with issuance in May (see chart) already exceeding the $69 billion priced in April.

While the chart doesn’t include Tuesday’s mega financing for Pfizer, it does show the dramatic drop in issuance volume in March from a year ago, when the Federal Reserve began to quickly raise rates from nearly zero. It also shows May issuance increased from a month before.

“The acceleration this week could be, at least in part, due to the upcoming U.S. debt-limit X-date in early June,” a team of BofA Global researchers, led by Yuri Seliger, wrote in a recent client note.

Pfizer didn’t immediately respond to a request for comment. Its shares closed 0.4% lower Tuesday.

Treasury Secretary Janet Yellen in early May said the U.S. could be unable to pay all of its bills by June 1, a warning she repeated earlier this week.

After a second round of debt-ceiling talks between President Joe Biden and congressional leaders Tuesday, House Speaker Kevin McCarthy said disagreements remain but that a deal might be possible by the end of the week.

See: McCarthy says second debt-ceiling meeting was ‘a little more productive,’ while Biden says he’s optimistic

Stocks closed lower on Tuesday, with the Dow Jones Industrial Average DJIA, +1.00% closing 336 points, or 1%, lower, while the S&P 500 index SPX, +1.30% fell 0.6 and the Nasdaq Composite Index COMP, +2.19% shed 0.2%.