Fed-Sponsored Artifact

A dash for cash is on. In yet another Fed-sponsored artifact, Companies Are Rushing to Borrow Cheaply While They Still Can.

Corporations have sold more than $47 billion of notes in the U.S. through Wednesday, around 60% above the same period in 2019. In Europe, investment-grade and junk bond sales including company and country debt broke a 79 billion-euro ($88 billion) weekly record set a year ago. And in Asia outside Japan, there have been more than $12 billion of sales, a record start for the year.

“Investor demand has been at, or close to, record levels in many instances,” said Lee Cumbes, a managing director in debt capital markets at Barclays Plc in London.

Demand is so strong that even companies with some of the lowest credit ratings, which might have struggled to borrow for much of last year, have been able to tap the market. Transocean Ltd., an offshore oil driller, sold $750 million of junk bonds on Wednesday. The notes carry a Caa1 rating from Moody’s Investors Service, putting them in the lowest tier of debt that companies typically issue. S&P Global Ratings has the securities the equivalent of one step higher at B-.

Bond Ratings

Image placeholder title

Note that Caa1 is just two steps "above default imminent with little prospect for recovery."

As long as companies can perpetually roll over debt these zombies can stay alive.

As of May, BBB complex has $3 trillion.

I wrote about it on July 17, 2019 in Junk Bond Bubble in Pictures.

Insave Bid for Bonds - 2007 Flashback

While doing a search on this topic I came across this pertinent warning of mine written Sep 29, 2007: An Insane Bid For BBB Rated Bonds.

"But whatever the reason, or whoever is doing the bidding, as long as there is an insane bid for corporate bonds one step above Junk, the stock market is unlikely to crack."

By the way, this setup is very deflationary.

Mike "Mish" Shedlock

Junk Bond Bubble in Pictures: Deflation Up Next

The widely discussed "everything bubble" is, in reality, a corporate junk bond bubble on steroids sponsored by the Fed.

Junk Bond Bubble in Six Images

The junk bond to BBB-rated bond spread and the spread between AAA to BBB bonds shows amazing complacency. It won't last.

Questioning the Value of Junk

I am in awe at how little extra yield investors are willing to take for junk bonds vs AAA-rated Bonds.

Excellent SRSrocco Report on Free Cash Flow Evaluation of Gold Mining Companies

Cash flow at miners is down and operating costs up. 2018 has not been a great year. What's going on?

Quantum Computers Will Make Even "Strong" Passwords Worthless

The race is on to perfect quantum computing. It will make your bank passwords and all existing security methods useless.

Super-Junk Leads the 2019 Asset Revival

The stock market is unlikely to crack until speculation in junk bonds gets blown out of the water.

Illinois Budget Out of Balance Again: Solution More Junk Bonds

An Illinois "Road Show" touts more junk bonds as a solution to a perpetual budget crisis. What a bunch of garbage.

AOC Defends $4,500 Pay Hike For Herself: "It's Not Even Like a Raise"

AOC discusses the meaning of a raise. Let's tune in.

Solar Companies Behind Tariff Increases are Foreign-Owned

Trump raised tariffs on solar panels pledging "America First." The two companies that petitioned Trump are foreign owned