High-grade companies issued a total of nearly US$9bn of corporate bonds on 10 July to take advantage of low borrowing costs, in the biggest back-to-back issuance session in four months. The previous day’s session on 9 July saw a total US$6.8bn of bonds issued.
“It’s very much an issuer’s market, rather than an investor’s market,” said Jody Lurie, corporate credit analyst at financial advisor Janney Montgomery Scott. “Investors have so much cash and new issues are the best option because they are generally the most liquid.”
Sumitomo Mitsui Banking Corp led the market in Tuesday’s session with a US$3bn bond deal, followed by a US$2bn offering from Chilean state-owned mining company Corporacion Nacional del Cobre de Chile (Codelco) and a US$1.1bn offering from US company Penske Truck Leasing.
Companies are going to market to take advantage of favourable borrowing costs. Barclays’ index of corporate bond yields, for which data goes back to 1973, stood at a record low of 3.16% as of 9 July. The bank added that even at their current level, average corporate yields still provide investors with an extra 1.97 percentage point over US Treasury rates.
Sean Simko, head of a fixed-income portfolio management at SEI Investments, said that investor appetite remains robust as investors increasingly believe that the low-yield environment is here to stay. “We are not anticipating yields moving higher in the near future and at this point we feel credit fundamentals remain healthy,” he added.
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Today the bank of England announced it would base interest rates from 0.25% to 0.5%. We have collated some initial comments from the industry on how this will impact the markets: