US corporate borrowers flooded the investment-grade and junk bond market on Tuesday, getting ahead of expected market volatility on this month's rates decision by the Federal Reserve and the upcoming US presidential election.

Nearly 35 corporate issuers announced new bond offerings on Tuesday, the first day of the holiday-shortened week, according to Informa Global Markets data.

The week of Labor Day is historically the busiest week of the year for high-grade bond market deal-making, while the Tuesday following the holiday is typically the busiest day of the year, according to a Tuesday report by Dan Krieter, the director of fixed income strategy at BMO Capital Markets.

Syndicate desks expect roughly US$50 billion worth of investment-grade deals this week, compared with an average US$61.1 billion since 2016, he said.

It could be a slower pace of supply compared to the historical average because many issuers had already opted to tap the market in August to get ahead of expected market volatility surrounding this month's Federal Open Market Committee meeting and the upcoming US presidential election.

Peter Toal, the global head of fixed income syndicate at Barclays, expects "an explosion" of primary issuance this week as issuers continue to get ahead of any near-term volatility.

"Borrowing conditions are neither too hot nor too cold but there are risks that could cause more market volatility in the near term. So if there is a window, we are trying to encourage issuers to raise debt now if they already haven't," he added.

Tightening corporate bond spreads, or the premium over Treasuries that borrowers pay for debt, since hitting their year-wide on Aug 5 will also drive September refinancing and new deals, according to Andrzej Skiba, the head of the BlueBay US Fixed Income team at RBC Global Asset Management.

"Investors might have to forget about the idea of a meaningful slowdown in investment-grade issuance in the second half of this year," he said.

High-grade spreads were at 96 basis points (bps) on Monday from 112 bps on Aug 5, according to the ICE BofA Corporate Bond Index. Meanwhile, junk spreads were last at 317 bps from 393 bps on Aug 5, according to the ICE BofA High Yield Bond Index.

Some 29 investment-grade deals are expected to price on Tuesday, according to IGM. These include paper from carmakers American Honda Finance, General Motors and Ford Motor.

Meanwhile, at least six junk bond deals were announced on Tuesday with three expected to price on Tuesday, including a US$500 million offering by fast food holding company Restaurant Brands, whose subsidiaries include Burger King and Popeyes.

  - Reuters