Wednesday, October 25, 2017

The Trouble With Growing Bond Numbers

The corporate bond market is booming. High-grade companies, excluding financial institutions, have issued nearly $712 billion in bonds so far this year, the most ever for a comparable period, according to Dealogic records going back to 1995.

Though monthly debt sales have slowed a bit since companies issued $102.4 billion in May, the most for any month this year, the market has remained strong. In the most recent sizable issuances, Northrop Grumman issued $8.3 billion this month, and Wal-Mart issued $6 billion.

The increased indebtedness has led some to suggest that more heavily indebted or lower-rated companies could run into trouble if the Fed raises interest rates. Strategists at BlackRock said this week that they were downgrading their outlook on U.S. credit to neutral, from overweight, citing high prices that could limit bond investors' returns going forward.

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