Yahoo helps spur US convertible bond sales The pace of US convertible bond market sales has roared back in recent weeks as companies look to take advantage of a strong US equities rally to offer the "hybrid" securities and secure cheap financing. Convertible bonds allow issuers to offer debt with ultra-low coupons but also give investors the option to convert the securities into stock if the company's share price reaches a preset premium during the bond's tenure. Nineteen companies have raised $4.1bn in proceeds so far this month, making November the most active month for new deals this year, according to data from Ipreo. This year is also on pace to be the most active in terms of new deals and proceeds since 2009, according to Dealogic. The pick-up in activity comes as the US stock market continues to set record highs, with the S&P 500 this week touching a record intraday high of 1,802. The gains have given companies confidence to demand favourable terms when they turn to the capital markets for financing. Ed Marrinan, a macro credit strategist at RBS, said: "It's a reflection of the bullishness we are seeing in the equity markets and investors" comfort with the optionality of indirect equity ownership" Yahoo, the internet search company, is preparing to sell $1bn of convertible senior notes due to mature in December 2018, in what will be one of the largest single deals on the US market this year. Yahoo is trying to price its transaction with a coupon of 0-0.5 per cent and have a "conversion premium" of 45-50 per cent, according to discussions it is having with investors. That would mean Yahoo's shares, which have already risen 79 per cent to $35.70, would need to climb to about $53 for investors to be able to exercise the option of converting debt into equity. The bond is expected to be priced at par. The deal would be the latest to offer such a low coupon. ServiceNow, a cloud-computing technology company, raised $575m earlier this month with a 0-0.5 per cent coupon and a conversion premium of 32.5-37.5 per cent. David Puritz, portfolio manager at Blue Mountain, said: "Issuers are getting compelling value in the global convertible market right now. Whether these turn out to be compelling value to investors at lower coupons and elevated premiums remain to be seen. Investors have said that issuers are able to secure such favourable terms in the convertible bond market because it has been starved of new deals in recent years, with the Federal Reserve suppressing interest rates under its emergency asset-buying programme. That has allowed companies to finance their activities at record low interest rates in traditional debt markets. Venu Krishna, head of equity-linked strategy at Barclays Capital, said: "With interest rates expected to rise next year and equity valuations having improved, convertible issuance is likely to remain strong in the coming years. This suggests a turning point in the convertible bond market post-2008.