Junk Bond Boomlet

Impressive upswing in this past week’s junk bond issuance, with a mad scramble to get deals done in a slightly more willing market. Mind you, the spreads were large, so it demonstrates how badly the capital was needed:

High-yield, high-risk bond sales almost tripled to $2.38 billion this week, the most in seven months, as borrowers took advantage of a rally in corporate debt to increase cash reserves and pay down credit lines.

… This week’s high-yield bond sales compare with $796 million the previous week and were the highest since the period ended June 26. That week’s $2.8 billion of sales excluding conversions of bridge loans to bonds was led by Ottawa-based Telesat Canada, a provider of fixed satellite services, and BE Aerospace Inc., the world’s largest maker of aircraft-cabin interiors, Bloomberg data show. Junk-rated borrowers raised $8.5 billion in June. BE Aerospace is based in Wellington, Florida.

… Junk-rated companies paid as little as 15.98 percentage points more than Treasuries on debt this week, down from a peak of 21.82 percentage points on Dec. 15, and the lowest since Oct. 30, according to Merrill’s U.S. High Yield Master II index. Overall yields narrowed two basis points to 18.03 percentage points from 18.05 on Feb. 6. High-yield debt is rated below Baa3 by Moody’s and lower than BBB- by Standard & Poor’s. A basis point is 0.01 percentage point.

More here.

Related posts:

  1. How to Get a BBB Bond
  2. Weak 5-Year Treasury Auction
  3. [Updated] German 10-Year Bond Auction Fails for Second Time
  4. Bond Market Calls Fed’s Bluff
  5. Hedge Funds Do Tech Takedown in Bond Market