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)