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Companies Use Low Rates to Issue Buckets of Debt

Corporations Tuesday were again taking advantage of historic low yields and a receptive bond market to issue bucket loads of new debt.

Bill and cash
Bill and cash

Monday's more than $15 billion in investment grade debt issuance made it the third busiest day of the year, and the market is on track for $30 billion or more in new debt this week in total.

Analysts say the dash to raise cash is largely because the market is relatively calm and won't be active much beyond Thanksgiving.

So far today, according to Thomson Reuters IFR, there was at least $6 billion scheduled for Tuesday, but that is likely to increase. Halliburton was on the calendar with $1 billion, its first issue since 2009, and International Paper , Philip Morris International and Encana were also bringing offerings.

The gusher of corporate debt also has to do with an overhang created as market participants held off due to concerns about Europe, so strategists see it as a positive that the debt market issuance is going smoothly, and there are also equity IPOs showing up on the calendar after last week's successful Groupon issue.

Companies also hold off new issuance during the earnings blackout period, which is mostly over.

There is also a rush to get in the window of time before Thanksgiving. After Thanksgiving, there are just two more weeks in early December when the markets are active.

Barry Knapp, head of equity portfolio strategy at Barclays Capital, said the flood of corporate issuance is a healthy sign for credit markets, but he also believes the market may have gotten some help from the Fed.

"On the margin, operation twist may have created some liquidity in the market," he said.

"Twist" is a program where the Fed sells its short-term Treasurys and replaces them with purchases at the long end in an effort to drive longer-term rates lower.

Knapp notes too that many companies coming to market are looking to refinance existing debt. "They're not adding leverage," he said.

Follow Patti Domm on Twitter: @pattidomm

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