Tags: Corporate | debt | high-yield | rates

Corporate Debt Issuance Is Red Hot in August

Monday, 27 August 2012 08:24 AM

Corporations have been issuing debt in droves this August, taking advantage of demand from investors who have grown weary of low yields on government debt.

Corporate treasurers have issued nearly $120 billion in debt so far this month, the Financial Times reported, citing Dealogic data.

The August figure is the highest since Dealogic began keeping records in 1995 and more than double the $58 billion average.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

Issuance is up in the United States, Europe and Asia, where low interest rates have often sent returns on government debt lower than inflation rates.

“Investors have been looking for a relatively safe place to store their money that will also give them a return better than the major sovereigns,” said Steven Oh, head of global credit and fixed income at PineBridge Investments, according to the Times.

Other experts agree the corporate debt has been very attractive when it comes to both investment grade and high-yield debt.

“There has been a lot of technical demand for high-yielding loan assets this summer,” said Dan Norman, managing director of the ING Investment Management senior loan group.

“The [yield] spread to alternatives such as U.S. Treasuries is very wide from a historical perspective.”

Demand for junk bonds has been so hot that yields on otherwise high-risk corporate debt are falling with more and more investors lining up.

The average yields on junk bonds dropped to 6.6 percent recently, a near record low, The New York Times reported, citing Barclays data.

“It’s amazing: You’re now seeing 4 to 5 percent yields for weaker companies,” said Adam B. Cohen, founder of Covenant Review, a credit research firm, according to The Times.

“These are the type of yields that you used to see for blue chips like Exxon and Pepsi.”

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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Monday, 27 August 2012 08:24 AM
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