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Brokerage Charles Schwab joins corporate debt rush with $2.5 billion offering

Published 2023-05-18, 08:40 a/m
Updated 2023-05-19, 10:55 a/m
© Reuters. FILE PHOTO: The company logo for Financial broker Charles Schwab is displayed at a location in the financial district in New York, U.S., March 20, 2023.  REUTERS/Brendan McDermid/

(Reuters) -Charles Schwab Corp is looking to raise up to $2.5 billion through a debt offering, the brokerage said on Thursday as more companies aim to benefit from investors trying to capitalize on a spike in yields.

The Texas-based company will raise the debt in two parts, via notes due in 2029 and 2034 and will use it for its corporate needs.

If held to maturity, the 2029 notes would yield 205 basis points more than the benchmark, risk-free U.S. 5-year Treasury, while the yield on 2034 notes would be 227 bps above the U.S. 10-year Treasury yield.

The appeal of investment-grade rated corporate bonds has increased amid growing expectations that the Federal Reserve will stick with higher rates for longer.

On Wednesday, Pfizer Inc (NYSE:PFE) announced its largest debt offering of $31 billion to fund its proposed acquisition of Seagen Inc.

Schwab's debt issue comes after the brokerage's first-quarter profit exceeded market expectations by benefiting from a surge in its interest income and CEO Walter Bettinger saying that its liquidity was strong.

The company's shares were up 0.3% at $52 in early trading.

© Reuters. FILE PHOTO: The company logo for Financial broker Charles Schwab is displayed at a location in the financial district in New York, U.S., March 20, 2023.  REUTERS/Brendan McDermid/

BofA Securities, Citigroup (NYSE:C), Credit Suisse (SIX:CSGN) Securities, Goldman Sachs (NYSE:GS), J.P. Morgan Securities and Wells Fargo (NYSE:WFC) Securities are the joint book-running managers for the offering.

Meanwhile, the U.S. debt ceiling debate in Washington has given investors hope to be cautiously optimistic after President Joe Biden and top U.S. congressional Republican Kevin McCarthy said they were determined to reach a deal.

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