By Mike Cherney 

AT&T Inc. is selling $17.5 billion in bonds Thursday to help pay for its acquisition of DirecTV, the latest giant debt sale amid low rates and an uptick in deal-making.

The offering ranks as the third largest corporate-bond sale on record, and it is the second largest this year, behind Actavis PLC's $21 billion deal in March. Overall, Verizon Communications Inc. still holds the top spot, with a $49 billion deal in September 2013.

The AT&T deal adds to this year's record pace of debt sales, as companies seek to take advantage of low borrowing costs before an expected increase in interest rates by the Federal Reserve later this year. Through Wednesday, high-grade companies had sold about $419 billion of bonds in the U.S. this year, the most on record, according to data provider Dealogic.

Investors piled into AT&T's offering, at one point submitting roughly $68 billion in orders for the new bonds, according to an investor following the sale. Buyers said they were enticed in part because the new bonds, which will mature in five to 31 years, offered more interest than the company's existing debt.

"We think it's a reasonable entry point for AT&T," said Jon Curran, a portfolio manager at Standard Life Investments, which oversees $383 billion and put in an order for the new AT&T bonds. "This is an example of a large bond deal that offers good value."

AT&T said it would redeem some of the bonds at a premium if the $49 billion DirecTV merger isn't completed by Nov. 30. But the company said earlier this week that it expects the deal to get final approval from regulators and close this quarter.

Investors said they expect more companies to tap the bond market in the coming months, to lock in low interest rates before the Fed makes a move. The Fed has held its benchmark short-term rate at near zero since 2008, but some analysts say the central bank could raise rates this year as the U.S. economy heats up.

Investment-grade U.S. corporate bonds have offered a total return, including price changes and interest payments, of 2.3% this year through Wednesday, according to Barclays data. That is higher than the 1.4% total return for U.S. Treasurys.

Collin Martin, director for fixed income at the Schwab Center for Financial Research, said his firm is recommending investors take an overweight position on investment-grade U.S. corporate bonds. He cited healthy corporate balance sheets and a manageable debt burden in the near term.

"The fundamental picture is pretty good," Mr. Martin said.

Write to Mike Cherney at mike.cherney@wsj.com

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