Corporate Bond Sales Surge in 2012
YOUNG MONEY Staff
31 October 2012
Near-Record Bond Issues
Data compiled by Bloomberg reveals that earlier in October, global conglomerate General Electric Co. sold $7 billion worth of these financial instruments derived from corporate debt. Business application provider Oracle Corp. issued $5 billion worth of these corporate bonds.
These major issuances brought October's total bond sales to $347 billion, which represented a new record for this month, according to the news source. The monthly sales figures left the 2012 corporate bond sales total within $116 billion of the record $3.4 trillion issued during the first 10 months of 2009.
Emerging Market Bonds
Data provided by Benzinga reveals that the market for emerging market (EM) corporate debt has been growing this year, as the sovereign debt of these economies is experiencing strong demand and dwindling supply.
Investment firm Pacific Investment Management Company, LLC (PIMCO) recently wrote that "the supply of U.S. dollar-denominated EM sovereign debt is decreasing and yields are near historical lows," according to the news source. As a result of this, the investment firm is encouraging market participants to explore the corporate debt offered by companies in these regions.
In a recent PIMCO note, Ignacio Sosa and Anton Dombrovsky stated that "the dollar-denominated EM corporate market has been growing steadily, and many corporates can offer higher yields and lower durations than sovereigns."
Surging Bond Markets
Exchange traded fund provider WisdomTree recently said that the market for corporate bonds in these developing economies has increased roughly 100 percent in size since 2008, the media outlet reports. In a note written earlier in the year, WisdomTree wrote that "since 2003, EM U.S. dollar-denominated corporate bond issuance has outpaced sovereign issuance in a trend we believe will make EM corporate debt an increasingly larger allocation to emerging market fixed income."
Bonds and Monetary Easing
In the week of the financial crisis, governments have injected record amounts of money into the economy and keeping interest rates at very low levels, according to Bloomberg. Many market participants have also sought bonds amid strong risk aversion. These factors have helped push the yields on sovereign debt to 0 percent or even lower, which has motivated investors to put their funds into corporate debt.
"There's a lot of money out there looking for a home," Elisabeth Afseth, an analyst at London-based Investec Bank Plc., who suggests investors refrain from putting money into debt issued by euro zone nations including Spain, Italy and Portugal, told the news source. "Government bonds give you almost nothing, so you’re left with corporate bonds, which give you a little bit more than nothing."
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