The Journal The Authority on Global Business in Japan

Businesses are expected to go to the world’s securities markets and do a record amount of fundraising this year. Although long-term interest rates in the West and other economies are still on the wane, there is talk of the US Federal Reserve raising rates by the end of the year.

That is motivating a lot of companies to get cash now while interest rates are low and share prices high.

During the seven months through July, businesses went to stock and bond markets to raise about $1.96 trillion, 2 percent more than they raised in the year-earlier period. It was the highest January–July figure since data began being collected in 1995.

Public offerings and other share placements accounted for a record $560 billion, while corporations issued $1.4 trillion worth of bonds. The biggest jump came in North America, where companies raised $840 billion.

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In July, Charter Communications, a US cable television provider, issued bonds worth $15.5 billion to cover the acquisition of Time Warner Cable. Helped by the strong stock market, leading generic-drug maker Actavis, now known as Allergan, this year raised $4.1 billion through a share offering.

Gerald Keefe, head of corporate banking of Citibank Japan, said a lot of the fundraising activity has been to pay for acquisitions and to improve companies’ financial health.

In Japan, where the Nikkei Stock Average has been hovering around 15-year highs, companies raised $15.9 billion during the first seven months of the year, up 4 percent from the year-earlier period. Sony had a ¥420 billion ($3.33 billion) share offering in July. Rakuten, which operates Japan’s leading online retail platform, placed ¥180 billion worth of shares in June.

There were plenty of share offerings in emerging countries as well, though corporations in Europe are not going to the bond market so much these days, mostly due to the Greek debt crisis.

If the current pace of marketplace fundraising continues, this kind of financing is expected to reach last year’s global record of $3 trillion. The securities boom largely stems from corporate sentiment that today’s low financing costs are unlikely to remain much longer.

Janet Yellen, chair of the Federal Reserve Board, in testimony to Congress in July, mentioned that it would be appropriate to raise the short-term interest rate “at some point this year,” as long as the US economic recovery remains on track. Some estimates peg “at some point this year” as being [September].

If the Fed does raise US rates, those in Europe and Japan would be affected, and stock market confusion could ensue.

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According to British bank Barclays, yields on dollar-denominated corporate bonds carrying AA ratings are trending upward and are currently around 2.5 percent. This is far below the 6 percent level of July 2008 and shows why companies want to secure financing now.

On the other hand, the investors buying all the bonds and shares—those who are actually doing the lending—are becoming more selective. “Investors are shifting their money to relatively safer assets, preparing for interest rate hikes,” said Mana Nakazora, chief credit analyst of BNP Paribas Securities (Japan).

In the corporate bond market, issuances of highly rated bonds are at a record high, while issuances of bonds with BB ratings or below—junk bonds—have dropped 18 percent. Few investors want to buy bonds from companies that already carry heavy debt burdens and will have even more financial difficulty when interest rates start hiking north.