rd80 (99.12)

Last week in bonds

October 16, 2012 – Comments (0)

Here's a rundown of some of the action in last week's new corporate bond issues.

The total new issue $ value was down from the previous several weeks.  Not a lot of excitement, but a couple of trends continue to develop. 

Companies with good, and even some not so good, credit ratings are saving quite a bit of money by refinancing existing debt.  For example, SO subsidiary Alabama Power will be paying $10 million per year less on $400 million of new debt than it's paying on $200 million of existing debt being redeemed.  Alabama Power improves its cashflow and adds $200 million to its coffers.

It's also becoming very common for firms based outside the US to make up a sizeable portion of the dollar-denominated borrowing.  Last week, Mizuho Corporate Bank was the biggest borrower in the US markets with $2.5 billion.  Second place was also based in Japan, Nippon Life Insurance tapped markets for $2 billion.  Both of those were private placements.

The past two weeks have also seen quite a bit of high-yield, aka junk, bond issues.  Two weeks doesn't make a trend, but it's something I'll be watching.  It's also consistent with some articles I've seen covering strong demand in the junk market as investors reach for yield.

I'll be making this a regular, weekly series.  It should usually post on Mondays for anyone interested in following along.  I know, today is Tuesday - I had a glitch with the article publishing system that pushed it back a bit.

As always, comments, questions, recommendations are welcome here or at the article.

Fool on!

Russ

Disclosure:  Long SO.