U.S. high-yield bond sales reached an annual record of $329.8 billion yesterday as companies reap the benefits of the Federal Reserve’s liquidity-boosting policies and investors grasp for yield, Bloomberg News reported. The crush of debt offerings accelerated in April after the U.S. central bank began purchasing some high-yield bonds as part of its efforts to support the corporate credit markets. Since then, issuance has eclipsed the prior annual sales record of $329.6 billion set in 2012, according to data compiled by Bloomberg. Companies staring at sharp, pandemic-induced revenue declines were emboldened to borrow billions of dollars to help ride out the pandemic. Some of the most virus-battered borrowers, including airlines, hotels and even cruise operators, were able to tap investors for financing, sometimes paying double-digit coupons. “A lot of the issuance was to get as much liquidity as you can, because things were looking like they were going to be stalled out for a while,” said Douglas Lopez, senior partner and portfolio manager at Aristotle Credit Partners. “This was the prudent move, but some companies may be building the liquidity bridge to nowhere.” The junk market’s record year follows the U.S. investment-grade bond market, which reached a new annual issuance high in mid-August. Europe’s high-yield bond sales surged in July, the busiest for that month since 2009. The Fed’s near zero-interest rate policy, now expected to last through 2023, has paved the way for billions of dollars to flow into funds that invest in high-yield debt as investors search for yield. The support has effectively turned high-yield into a borrower’s market, and all-in yields for U.S. junk bonds have dropped to 5.81 percent, near pre-pandemic levels, according to Bloomberg Barclays index data. Since July, some 65 percent of new high-yield bonds have come with sub-6 percent coupons, according to research by Barclays Plc strategists.
