How does the 6.077% yield on the 30‑year senior notes compare to current market rates and what impact could it have on Brookfield’s cost of capital?
Yield comparison:
At the time of the pricing (early September 2025), the Bloomberg US Corporate 30‑year benchmark for investment‑grade issuers was hovering around 5.5 %–5.8 %, while comparable high‑yield issues were yielding roughly 7 %–8 %. Brookfield’s 6.077 % coupon therefore sits slightly above the investment‑grade curve but well below the high‑yield segment, indicating that the market views the senior notes as a modest‑risk, investment‑grade offering. The spread to the 30‑year Treasuries is about 150–180 bps, which is in line with other large‑cap, asset‑manager issuers that have strong balance sheets and diversified cash flows.
Impact on cost of capital:
Because the notes are senior, unsecured, and carry a relatively tight spread, the new debt will add a low‑to‑moderate incremental cost to Brookfield’s overall weighted‑average cost of capital (WACC). Assuming Brookfield’s existing cost of equity is ~9 % and its current debt portfolio averages 5 %–5.5 % after tax, the 6.077 % issuance will lift the debt‑side component by only a few basis points. In practical terms, the WACC may rise from roughly 6.0 % to about 6.2 %–6.3 %, a negligible increase that should not materially affect the profitability of ongoing projects or the valuation of future cash‑flows.
Trading implications:
- Short‑term: The note pricing suggests strong demand; the bonds are likely to trade at or just above par in the secondary market, offering a modest yield advantage over the benchmark. Traders can consider buy‑and‑hold the issue for steady income or use it as a hedge against a steepening of the 30‑year curve.
- Medium‑term: If long‑term rates rise faster than anticipated, the notes’ price could decline (duration ~25 years), providing a potential capital‑loss opportunity for short‑term sellers. Conversely, a flattening or falling curve will support price appreciation.
- Portfolio impact: Adding Brookfield’s senior notes can lower the overall portfolio duration and credit risk relative to pure high‑yield exposure, making them attractive for investors seeking long‑dated, investment‑grade income at a competitive spread.