Corporate Bond Sales Speed Past $1 Trillion

Corporate treasuries are continuing to take advantage of low interest rates, leading to a surge in sales of high-grade U.S. corporate bonds, according to reports in the Financial Times.

The publication said Friday (Sept. 8) that sales of these bonds surpassed $1 trillion last week, doing so at their fastest pace ever. Apple, IBM and Visa are just some of the top corporates taking advantage of lower interest rates.

“Corporate treasurers are going to take advantage of these lower rates while they can and build up liquidity,” said Permanent Portfolio Family of Funds president and portfolio manager Michael Cuggino in an interview with the publication. “We have seen companies over the past few years doing that and it has just continued.”

Reports said investment-grade U.S. corporate debt saw an average yield of 3.05 percent last week, its lowest rate in nearly a year based on data by Bank of America Merrill Lynch. Dealogic data showed companies borrowed more than $40 billion last week alone through the U.S. debt markets as top-rated firms secure interest rates below 3 percent.

The trend has encouraged global investors to take action, with analysts at Wells Fargo, citing EPFR stats, finding that funds that can invest in high-grade U.S. corporate bonds have been boosted by $218 billion this year alone.

Meanwhile, in China, concerns continue to mount over bad corporate debt levels. They’ve caught the attention of the International Monetary Fund, which held a conference last year to discuss bad corporate debt. That bad corporate debt had hit 145 percent of total gross domestic product by June 2016.

“Mounting corporate debt is a key fault line in the Chinese economy,” said IMF first deputy managing director David Lipton at the time. “Corporate debt remains a serious — and growing — problem that must be addressed immediately and with a commitment to serious reforms.”