Buttonwood: Desperately seeking yield

Posted: November 8, 2012 in economy
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UK Only Article: 
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Now, hug a Republican

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Buttonwood

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Investors are gorging on corporate bonds. Is an asset bubble being inflated?

THESE are good times for the corporate treasurers of large firms. They can raise money in the bond markets at the lowest cost in living memory (see chart).
Companies have been quick to take advantage of the opportunity. By the end of October global corporate-bond issuance for the year stood at $3.3 trillion, close to the record set in 2009. The pace has not slackened: Abbott Laboratories this week raised $14.7 billion, the biggest deal of the year, at maturities ranging from three to 30 years and with yields as low as 1.2%. The ease with which large companies can raise money is in sharp contrast to the plight of smaller businesses, which are still finding it hard to get finance from the banks.
With the return on cash close to zero, and government-bond yields in many markets near record lows, investors are indulging in another desperate “hunt for yield” akin to the one that …

via Economic Crisis http://www.economist.com/news/finance-and-economics/21565974-investors-are-gorging-corporate-bonds-asset-bubble-being?fsrc=rss

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