Corporate bond-buying binge sets record - WSJ

Discussion in 'Economics' started by jnorty, Nov 13, 2009.

  1. jnorty


    as all manias this ends very very badly. the world powers manipulated stocks higher so every company on earth could reliquify. now they'll get stuck and this time they go to zero.

    Corporate bond-buying binge sets record - WSJ

    WSJ reports companies around the world are racing to sell a record volume -- trillions of dollars worth -- of relatively cheap bonds as they take advantage of investors' voracious appetite for corporate debt and repair wounded balance sheets ahead of the holiday slowdown. "The capital markets have opened up and issuers have raced to it because you never know how long the window will remain open," said Jason Mudrick, of Mudrick Capital Management in New York. The U.K. satellite communications company Inmarsat, the American retailer Toys "R" Us and the Polish broadcaster TVN were among the low-rated issuers lining up to sell risky junk bonds this week as cash-rich portfolio managers gladly opened their wallets in pursuit of higher returns... Investors across the globe have bought more than $2.7 trillion of new corporate bonds so far this year, a record, data provider Dealogic said. That contrasts with less than $1.7 billion in all of 2008, when the financial crisis shut down capital markets. At first, investors favored debt from higher-rated companies in recession-resistant industries like telecommunications and energy. But now, flush with cash and eager to increase returns, they are buying new bonds from casino operators, homebuilders, airlines and other companies that most had given up for dead, and as such, were locked out of the capital markets just a few months ago.
  2. Less than solid business will go bust under these bonds debt (remember the 80's junk bond bust?)

    Good companies will have no problem.
    Besides, good companies can borrow at very low rates, compared to speculative/temporary/vogue businesses.