Sales of longer-term bonds are accelerating at a record pace in the US, with corporate borrowers from Morgan Stanley to FedEx selling 30-year debt for the first time in at least a decade.
According to data compiled by Bloomberg, issuance of investment-grade bonds maturing in 30 years or more totals US$83.6bn to date during 2012, already exceeding the annual total in 2010 and 2011. Offerings are growing about six times faster than the overall high-grade market.
Corporate treasurers are exploiting record-low borrowing costs as the Federal Reserve says it will hold its target interest rate at between zero and 0.25% through at least late 2014. An average yield of 4.57% on investment-grade securities maturing in 15 years or more is lower than the rate borrowers paid in 2009 to raise funds due in one to three years.
“Issuers are viewing it as maybe a once-in-a-lifetime opportunity to fund at the levels that they can in the long end of the curve,” said Jonathan Fine, Goldman Sachs’ head of investment-grade syndicate for the Americas. Low Treasury yields are “encouraging issuers to layer in more longer-dated debt,” he said.
While investors’ growing appetite for long bonds is a boon to companies, demand is also helping to send duration, a measure of securities’ price sensitivity to yield changes, to the highest level in almost two decades for all investment-grade debt, according to the index issued by Bank of America Merrill Lynch (BofA Merrill).
“Investing in long-term debt with yields so low carries enhanced risk,” said Alan Shepard, an analyst at Madison Investment Holdings. “There might be some parts of that story that don’t end well for investors. But if you’re a corporate treasurer, you’re doing what you’ve got to do.”
The US money market fund reforms came into effect in 2016 and are already dramatically shaping US fund industry with investors flooding out of prime funds and into government securities. While the reforms are similar, they are not the same. GTNews interviews Yeng Bulter, global head of the cash business at State Street Global Advisors on the differences.
The top five sectors Asian fintech investors are interested in are data analytics, blockchain, lending, payments and regtech, according to Gary Hwa, EY regional managing partner.
On the third day of the Singapore Fintech Festival conference, there was a focus on specific applications of fintech innovation. One was trade finance, which is clearly is ripe for a revolution.
Kicking off day two of the Singapore Fintech Festival, Deloitte Chairman David Cruikshank said that fintech is significant for three reasons. First, customer expectations of services are higher than ever. Second, barriers to entry are lower than before. And finally, financial institutions (FIs) face a threat of what a competitor might do.