In an effort to profit from investors hoping to take advantage of a rise in yields, Charles Schwab Corp announced on Thursday that it is seeking to raise up to $2.5 billion through a debt offering.
The Texas-based business will issue the debt in two installments via notes with maturities in 2029 and 2034, and use it for internal purposes.
The yield on the 2029 notes, if held to maturity, would be 205 basis points higher than the benchmark, risk-free U.S. 5-year Treasury, while the yield on the 2034 notes, if kept to maturity, would be 227 bps higher.
A rising number of people now expect the Federal Reserve to maintain higher rates for a longer period of time, which has raised the attraction of corporate bonds with investment-grade ratings.
In order to finance its proposed acquisition of Seagen Inc., Pfizer Inc. announced its largest debt offering on Wednesday, amounting to $31 billion.
The debt problem at Schwab comes after the brokerage’s first-quarter profit exceeded market forecasts thanks to an increase in interest income and remarks from CEO Walter Bettinger about the company’s good liquidity.
In early trade, the company’s shares were up 0.3% at $52.
The joint book-running managers for the offering are BofA Securities, Citigroup, Credit Suisse Securities, Goldman Sachs, J.P. Morgan Securities, and Wells Fargo Securities.
Meanwhile, President Joe Biden and top Republican in the US Congress Kevin McCarthy indicated they were determined to strike a solution, which has given investors reason to be cautiously hopeful regarding the US debt ceiling issue in Washington.
