S&P says corporate spec-grade bond yields at historic lows

Wed Jan 16, 2013 12:51pm EST

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Jan 16 - 2012 couldn't have been a better year for issuers and investors in the U.S. corporate bond market, especially those in the speculative-grade segment, said an article published today by Standard & Poor's Global Fixed Income Research, titled "Market Conditions In The U.S. Corporate Bond Market Favor Both Issuers And Investors." "The financial turmoil in Europe, slowing economic growth in developing markets, and all-time low U.S. Treasury rates prompted investors to move more and more money into U.S. corporate debt," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. At the same time, the increased demand for corporate debt created some of the most favorable lending conditions for corporate borrowers since the financial crisis of 2008. "And this trend shows no signs of reversing thus far in 2013," said Ms. Vazza. The yield on five-year U.S. Treasuries hit a record low of 0.56% on July 24, 2012, and has remained relatively unchanged since--forcing investors to look for returns elsewhere. Lured by credit spreads, which were approximately 750 basis points at the beginning of 2012, a wider-than-normal swath of investors began investing in speculative-grade corporate debt (those rated 'BB+' and lower) over the course of the year. Although the relative cost of debt for corporations is still higher than the levels seen before the 2008 recession, the absolute cost of borrowing has fallen to record lows for most corporate borrowers. "Since the start of 2004, the yields on 'BB+' rated industrial bonds have never been lower, reaching 3.58% as of Jan. 11, 2013, and the same holds true for those rated 'BB' and 'BB-', which are yielding 4.2%," said Ms. Vazza. "Similarly, industrial bonds in the 'B' rating category are yielding 6.7%--the lowest level since Feb. 23, 2005.

Temporary contact numbers: Diane Vazza (646) 752-5369; Mimi Barker (646) 784-1061

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Comments (1)
RFF wrote:
And, do not use S and P spreads — they are wrong. Better to use the free data from BoFA/Merrill, which is on the St. Louis fed website. These people know what they are doing, unlike the dopes from S and P.

Jan 17, 2013 8:23pm EST  --  Report as abuse
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