U.S. companies have been raising money aggressively in bond markets this summer, prompting money managers to take their computers to the traditionally quiet mid-year vacations. For asset-backed securities, which are the most popular, sales this summer have averaged higher than the rest of the year. July’s investment-grade U.S. corporate bond season was the busiest since 2017, with sales totaling $110 billion as of Monday and signs of further expansion on Tuesday, including Netflix Inc. (NFLX.US) as the first issuance of an investment-grade company. In addition, this summer is also the busiest summer for leveraged loan data since 2013.

The recent surge in bond sales is partly due to investors rushing to buy bonds to lock in higher yields as inflation shows signs of waning. The Federal Reserve will meet on Tuesday and Wednesday and may give more hints about its interest rate plans, but yields have been falling since hitting recent highs in April. The U.S. presidential election in November is likely to roil interest rate markets, so many companies are looking to sell bonds before the election.

In addition, market participants have learned during the pandemic that they can work anywhere, including the beach, if necessary. Ivo Turkedjiev, a portfolio manager at New Mountain Capital who focuses on leveraged loans and mortgage bonds, said he takes his laptop with him on vacation to prevent missing out on opportunities when the market is active.

“The window of time when the market is actually closed is getting smaller and smaller,” Turkedjiev said. “The last two weeks of August are when it’s hard to get things done, but even then, bankers try to sneak a deal.”

Two major U.S. holidays, Memorial Day in May and Labor Day in September, have traditionally heralded a slow season for new bond issuance. But in the ABS world, the summer slowdown is disappearing. Data compiled by Bloomberg show that ABS sales will average $5.6 billion per week in the summer between 2020 and 2023, exceeding the $5 billion per week for the rest of the year. This marks a reversal of the overall trend of generally lagging summer sales between 2016 and 2019.

Bank of America “With more issuance, there are more players in the market and you can’t avoid the summer as you thought,” said Matthew McQueen, head of global mortgage and securitization products and global municipal banking and markets. “If you’re an issuer that used to do two deals a year, now you need to do four deals a year and it’s going to end up in the summer.”

If the strong momentum continues, ABS sales this year could surpass 2005 levels and set a record, Deutsche Bank director Kayvan Darouian wrote in a July 16 client note.

The longer turnaround time required to prepare transactions for ABS may also be a factor in the summer issuance. Issuers typically package loans into bonds, and it takes time to issue the combined collateral, said Aoiffe McGarry, a managing director at Citigroup.

“We have a longer warm-up period and we don’t have the quick flexibility that an investment-grade firm does because we have to aggregate the collateral, which can be thousands of loans,” McGarry said.

The recovery in ABS summer sales was particularly evident in the first two weeks of August. Sales in this period jumped from about $11 billion in 2019 to about $18 billion in 2023, the data showed.

“We certainly recommend that issuers not take action in the last two weeks of August before the Labor Day holiday,” said Brian Wiele, managing director and head of securitized product syndication at Barclays. “The summer slowdown has been compressed from perhaps four to six weeks to these two weeks.”

Total ABS sales were about $282 billion at the end of last year, compared with $198 billion in 2016, data compiled by Bloomberg show.

Strong investor demand for yield is driving frenetic sales activity in multiple markets. State and local governments are selling about $9 billion a week in municipal bonds, bringing their total sales this year to about $269 billion as of late last week.

In the ABS market, just as last summer sales were slightly lower than the rest of the year, this summer slowdown has not completely disappeared, but it is less frequent and less intense than in the past. The winter holiday season remains quiet, and there are still few transactions in the last two weeks of December.

“The last two weeks of the year are always used only in emergencies,” Wiele said. “At the end of the year, it becomes a big question mark whether investors will have money left to invest.”

So far this year, the ABS market has averaged more than $8 billion in weekly sales during the summer, $850 million higher than the rest of the year. Major deals priced during the summer window included a $1.84 billion securitization by automaker Ford, an $800 million whole-business securitization by fitness chain Planet Fitness, and a $428 million bond sale by Carlyle Aviation Partners secured by aircraft.

“We expect the ABS market to continue to attract new investors and issuers,” said Nick Travaglino, head of Nuveen’s securitization team.

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