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VIDEOCredit Markets on Fire as Companies Issue Debt
Investors are now looking for extra yield, wanting to own corporate debt securities over US treasuries.
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However, there was some positive news; yesterday the US corporate-bond market saw its busiest day in almost four months as company debt fell to the lowest level in six years. Investors are looking for extra yield, wanting to own corporate-debt securities over US treasuries.
The $14.2 billion in bond sales was led by Goldman Sachs (GS) and Morgan Stanley (MS). Goldman came to market with its biggest offering since January 2009, raising $3 billion in a two-part bond offering. Morgan Stanley also sold $3 billion of debt after it reported its quarterly results. Companies like Wynn Resorts (WYNN) and Noble (NE) also took advantage of lower borrowing costs.
Bloomberg data show that Goldman offered $2.25 billion of five-year 3.7% notes that yield 205 basis points. Morgan Stanley also issued $1.25 billion of 4% debt to be paid in 2015 at a spread of 205 basis points and $1.75 billion of 5.5% notes that mature in 2020 and pay 270 basis points. Wynn Resorts issued $1.32 billion of first-mortgage bonds and Noble sold $1.25 billion of debt in a three-part offering.
Analysts believe that companies are attracted to the bond market because they're taking advantage of their strong earnings reports and attractive borrowing costs. And investors are attracted to the debt markets because they're looking for extra juice. According to a Wells Fargo analyst, investors see the corporate market as a place of decent value since spreads on bank paper are still quite wide.
With the market dealing with so many uncertainties right now, score another one for the bull camp.
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