WASHINGTON, Feb 28 (Reuters) – U.S. companies with the highest credit ratings have issued a record $144 billion in debt so far in February.
February’s investment-grade corporate bond issuance was the busiest ever this month, with the balance sheet already close to 20 billion a report as of Monday.
Corporates have rushed to issue bonds as yields hit new highs and the Federal Reserve tries to keep interest rates high for longer.
Traders now expect the Fed to hike rates to about 5.4% in July, with only a modest decline through December, futures markets are showing. In early February, the market was forecasting interest rates to peak below 5.0%, with several rate cuts through year-end.
The average yield on US investment grade bonds rose to 5.55% on Monday (.MERC0A0) from just 4.94% on February 1st.
last update
Watch 2 more stories
“There’s a lot more yield to be had in corporate bonds now,” said David del Vecchio, co-head of PGIM Fixed Income’s US investment-grade credit team.
February bonds were 3.64 times oversubscribed on average, according to data from Informa Global Markets.
Investors still have plenty of cash despite the issuance spate, said Blair Shwedo, head of IG corporate bond trading at US Bank.
Analysts expect a new bond offering of $160 billion to $165 billion in March.
“With more volatility, you may see some near-term negative returns, but overall we are well positioned to deliver a very nice positive total return for investment grade credit in 2023,” said Natalie Trevithick, head of investment grade credit strategy at investment management firm Payden & Rygel.
reporting by Matt Tracy in Washington; Adaptation by Shankar Ramakrishnan and David Gregorio
Our standards: The Thomson Reuters Trust Principles.
Comments are closed.