Companies rush to tap U.S. bond market as credit conditions ease

, according to data from Dealogic, compared to a total of US$36.6-billion in the last five weeks of 2022.

That’s despite the U.S. central bank’s insistence that it will keep interest rates elevated until it reaches its target 2 per cent inflation rate. Treasury yields have fallen as investors bet that interest rates will peak at around 5 per cent in June, bringing yields on corporate debt lower too. In the minutes from its December meeting released last week, Fed officials warned that “unwarranted easing in financial conditions, especially if driven by a misperception by the public of the committee’s reaction function, would complicate the committee’s effort to restore price stability.”

John McClain, a high-yield portfolio manager at Brandywine Global Investment Management LLC, says he had low expectations of more high-yield issuance in the coming weeks as the magnitude of the Fed’s next interest rate increase at the end of January is unclear. “The credit market is clearly telling the equity market: we don’t see a recession, and if we do see one, it will be a mild one,” says Andy Brenner, head of international fixed income at NatAlliance Securities LLC.

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