Tags: corporate | bonds | sales

Companies Gobbling Down Cheap Money for Now

By    |   Tuesday, 17 Nov 2009 01:11 PM

Interest rates are so low, even for corporate bonds, that companies are issuing debt even though they have no any apparent need for the money.

Example: Equipment rental company United Rentals Inc. seized the opportunity to stockpile cash by selling $500 million in 10-year bonds earlier this week.

"We didn't have an immediate near-term financing need, but we saw this as an opportunity," company treasurer Irene Moshouris told The Wall Street Journal.

"The market was more open and liquid than it has been in previous months."

Many companies and governments in emerging-markets have already tapped the bond markets — and more borrowers may be coming.

The ease with which companies sell bonds has some investors worried about how some of them will meet the debt they are issuing when it becomes due.

Data provider Dealogic reports that investors across the globe have set a record by buying more than $2.7 trillion of new corporate bonds so far this year, far more than the $1.7 billion they purchased in 2008.

Activity on other types of bonds shows sales are rising there as well, Bloomberg reports.

Sales of Build America Bonds, created under the Obama administration’s stimulus package, rose 28 percent in the third quarter as municipalities took advantage of their federal subsidy to lower interest costs.

And bond issues by U.S. state and local governments amounted to $20 billion in the period, compared with $15.4 billion in the second quarter, when the bonds were introduced.

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Interest rates are so low, even for corporate bonds, that companies are issuing debt even though they have no any apparent need for the money.Example: Equipment rental company United Rentals Inc. seized the opportunity to stockpile cash by selling $500 million in 10-year...
corporate,bonds,sales
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2009-11-17
Tuesday, 17 Nov 2009 01:11 PM
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