Elon Musk is the CEO of Tesla.
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- Tesla has delayed a $1 billion bond offering as the Ukraine war and Fed policy rocks markets, according to a Bloomberg report.
- The S&P 500 investment grade corporate bond index has fallen almost 8% so far this year as central banks have cut back on support for economies.
- Elon Musk’s car company has issued bonds based on income streams from its auto loans since 2018.
Tesla has reportedly delayed a bond offering worth more than $1 billion as volatility causes companies to pull back from markets.
Elon Musk’s company was due to issue bonds backed by leases on its cars but has shelved the plans for now, Bloomberg reported, citing people familiar with the matter. Tesla did not respond to Insider’s request for comment.
Tesla has issued bonds – known as asset-backed securities or ABS — backed by the loans it makes to customers for vehicles since early 2018. The idea is that Tesla, with the help of major investment banks, bundles its loans together into securities and sells them to investors, who then receive an income stream.
However, the volatile state of financial markets right now has caused many companies to halt bond offerings.
Russia’s invasion of Ukraine and central banks’ moves to start hiking interest rates to tame inflation have all caused turmoil for bonds.
The yield on the key 10-year US Treasury note, which sets the tone for borrowing costs in the US and around the world, has been on a wild ride. Yields move inversely to prices.
It rose sharply at the start of the year, only to tumble when the war began, before shooting up to a three-year high of around 2.2% as investors braced for the Federal Reserve to raise interest rates aggressively in 2022. The Fed raised interest rates for the first time since 2018 on Wednesday, by 25 basis points.
The S&P 500 investment grade corporate bond index has fallen almost 8% so far this year as the Fed has prepared to cut back on the stimulus that supported companies in 2020 and 2021.
Bloomberg reported that at least seven securitized debt deals, such as Tesla’s ABS plans, have been paused since war broke out in Ukraine.
Tesla has also come under pressure from global inflation, Musk said Sunday. “Tesla & SpaceX are seeing significant recent inflation pressure in raw materials & logistics,” he tweeted.
Russia’s invasion of Ukraine has pushed up the prices of energy, wheat, metals and other commodities.
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