Corporate borrowers flood market after Fed decision

Corporate borrowers are flooding the US market with new debt sales, encouraged by lower rates and emboldened by a Federal Reserve that has been in no rush to begin withdrawing its loose monetary policy.

Ten investment-grade companies are selling new bonds on Monday, including Sherwin-Williams Co. and Westpac Banking Corp. Among the high-yield companies, Ford Motor Co. debuts green bonds and at least seven other grade bond deals were announced. speculative, the highest daily tally in about a month, according to data compiled by Bloomberg.

Leveraged loans are also advancing steadily with some market participants expecting the issue to remain active in December.

At least seven companies announced new loan agreements on Monday, including Summit Health, which seeks to lower the costs of an existing loan.

Meanwhile, a successful year continues for the issuance of securitized debt. This week alone, at least 14 companies could place new asset-backed securities, after 12 issuers placed $ 7 billion in asset-backed securities in the first week of November. Sales of secured credit obligations, already at a record, appear set to pick up the pace through the end of the year.

Conditions have rarely been better for companies to issue debt cheaply, and the fact that the Fed said last week that it is in no rush to raise rates appears to have inspired even more issuance.

The latest wave of indebtedness can be attributed to “a combination of the Fed meeting that didn’t have many surprises, companies coming out of the October earnings period pauses, rates falling back toward the lower end of the recent range, and the need to issue before Thanksgiving and the slowdown observed at the end of the year”Said Rey Travis, director of investment grade companies at Voya Investment Management.

The 10-year Treasury yield fell below 1.5% on Friday for the first time in a month and was around 1.48% on Monday. And the average spread on investment-grade corporate bonds fell 2 basis points to 86 basis points last week, further reducing borrowing costs for the highest-rated issuers.

After a week full of expansive announcements from central banks around the world, some large investors are sounding the alarm that bubbles are emerging and systemic risks are growing due to such flexible financial conditions. But for corporate borrowers and bond investors, the good times continue.

Strong corporate results and a strong US employment report have added to optimism about the economic recovery, prompting junk bonds to post the biggest gains in more than two months on Friday.

Risk debt has been the best performing US fixed income asset class this year, with a total return of 5%, according to data from the Bloomberg Bonds Index.

US junk bonds are about to break last year’s annual record for new debt issuance of $ 432 billion. A new record is likely to be set no later than Wednesday, when Dish Network Corp. is scheduled to issue $ 4 billion in new bonds.

America’s two largest high-yield bond exchange-traded funds, the iShares iBoxx high-yield corporate bond ETF and the SPDR Bloomberg high-yield bond ETF, posted their biggest cash inflows since March on Friday.