With the market for short-term corporate debt seizing up in the U.S., some of the world’s biggest companies, including Exxon Mobil Corp. and PepsiCo Inc., turned back to the bond market to raise cash yesterday, Bloomberg News reported. In a sign of just how badly financial markets have been thrown out of whack by the coronavirus outbreak, yields on normally ultra-safe corporate debt maturing in as little as 30 days — known as commercial paper — have been surging faster than yields on bonds maturing in 10 years or more. The Federal Reserve announced steps to try to unlock the commercial paper market, but some borrowers opted not to wait for that to happen. Exxon moved forward with a five-part bond sale, while Pepsi is looking to price a $6.5 billion offering. Many of the issuers yesterday were planning to use the debt proceeds to refinance their commercial paper, which companies rely on to cover short-term financing needs like payroll. Usually investors require more compensation when lending on a longer-term basis, but the nearer-term risk of recession and rising defaults have cast doubt on some companies’ ability to finance day-to-day operations. Companies have issued less commercial paper as a result and have often resorted to drawing down credit lines instead.
