Debt Deals Flood Market
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According to a report from the Wall Street Journal on Wednesday, companies are flooding the bond market this week with new debt, as the threat of saturation gets closer to reality.
The report estimated that in the past two days $51 billion in fresh corporate bonds and leveraged loans have come to market, according to data from Dealogic and Standard & Poor's Leveraged Commentary & Data Group.
Wednesday was the busiest day of the year for issuance for high-grade bonds in 2010, and this week is on pace to be the busiest of the year, despite the impact of the Labor Day and Rosh Hashanah holidays limiting the number of possible buyers.
Global investors are scrambling for higher-yielding assets, while corporate borrowers are being boosted by the low interest rates. Investors are looking for alternative investments as cash is not yielding returns and the stock market has stalled.
This week, Allergan Inc. (NYSE: AGN) borrowed $650 million at an interest rate of 3.375 percent, marking the lowest 10-year yield for a large U.S. corporate bond issuance in 15 years.
The borrowing in the bond market slowed in the spring as investors were bogged down with fears over the European sovereign debt crisis, but the low interest rates have companies issuing to eager investors.
The risks facing the bond market are a more rapid than expected recovery in the economy, pushing interest rates higher and investors back into the stock market. Companies could also upset bondholders by using stockpiled cash to buy back stock.
The report estimated that in the past two days $51 billion in fresh corporate bonds and leveraged loans have come to market, according to data from Dealogic and Standard & Poor's Leveraged Commentary & Data Group.
Wednesday was the busiest day of the year for issuance for high-grade bonds in 2010, and this week is on pace to be the busiest of the year, despite the impact of the Labor Day and Rosh Hashanah holidays limiting the number of possible buyers.
Global investors are scrambling for higher-yielding assets, while corporate borrowers are being boosted by the low interest rates. Investors are looking for alternative investments as cash is not yielding returns and the stock market has stalled.
This week, Allergan Inc. (NYSE: AGN) borrowed $650 million at an interest rate of 3.375 percent, marking the lowest 10-year yield for a large U.S. corporate bond issuance in 15 years.
The borrowing in the bond market slowed in the spring as investors were bogged down with fears over the European sovereign debt crisis, but the low interest rates have companies issuing to eager investors.
The risks facing the bond market are a more rapid than expected recovery in the economy, pushing interest rates higher and investors back into the stock market. Companies could also upset bondholders by using stockpiled cash to buy back stock.
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