US junk bond market hits new record as excess liquidity prompts investors to seek higher yields

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The US junk bond market is once again at an all-time high, thanks to yield-hungry investors and an economy teeming with bottomless liquidity.

A new record of 149 companies took advantage of the U.S. high yield bond market, including cryptocurrency exchange Coinbase and medical supplies producer Medline, in a bid to quickly boost cheap cash, data shows of Leveraged Commentary and data cited by Financial Fois. The latest trend is in response to generous quantitative easing policies by central banks, which have cut interest rates to near zero and freed up historic amounts of liquidity in financial markets.

The cheap fund markets have seen an influx of greedy investors looking for higher yields, as corporate bonds offer a significantly higher yield than government debt assets. In fact, the current landscape of historically low interest rates has even prompted some companies with leveraged loans to take advantage and refinance into bonds that offer significantly higher yields. According to an index tracked by Ice Data Services, the sharp increase in bond issuance has caused the junk bond market to accumulate a face value of outstanding debt of more than $ 1.5 trillion.

Other data cited by the Financial Times showed that during the month of September, 26 new corporate bond issuers entered the high yield bond market, the highest on record since 2005. Between time, 13 other companies have also joined the tally since early October, with online gaming platform Roblox reportedly one of them.

The latest rally in the junk bond market has raised concerns that the influx of cheap liquidity will inflate corporate debt to alarming levels. To make the situation even more complicated, some investors have raised concerns about the lack of time to conduct due diligence on bond issuers, as the time between the start and the conclusion of new transactions is often a long one. daytime.

“Much of this issuance, like a lot of things we see, is just a by-product of the excess liquidity we have in the system,” explained the portfolio manager of Brandywine Global Investment Management. , John McClain at the Financial Times. “We see excessive amounts of capital chasing returns and trying to find a home. I don’t think it’s gonna slow down anytime soon. “


Information for this briefing was found via the Financial Times. The author has no title or affiliation related to this organization. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author does not hold any license.


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