January opened the spigot for high-grade bonds
The first week of the year was a busy one in the bond market.
Driving the news: A total of 39 investment-grade companies placed bonds last week, part of a widely expected borrowing spree prompted by plunging yields.
- It was the highest tally of borrowers in any given week in over two years, according to PitchBook LCD.
The big picture: Money got a lot less expensive over the last few months, especially after Federal Reserve officials in December hinted at rate cuts ahead. The average yield on IG bonds has dropped by almost a full percentage point since early November.
The impact: All of a sudden, refinancing looks a lot more attractive.
- Companies that went for it after January 1 include Ford, Toyota and John Deere.
Worth noting: The first-week spree wasn't as large as some had expected last month, wrote analysts from BofA Global Research.
- That may be because of the mini sell-off to start the year for both stocks and bonds.
- By dollar amount, the week produced $56 billion in bonds — that's pretty high, but three weeks last year had higher totals, LCD data shows.
What to watch: Whether this issuance spree will extend to the segment of the market where lower-credit quality companies borrow — the high-yield bond market. It got off to a slow start last week.