PrefBlog

Do I detect a little reaching for yield?:

Sales of junk bonds in the U.S. have already set a record for August, even as yields at about record lows combined with a slowdown in earnings growth spark concern the market for the riskiest corporate debt has peaked.

Charter Communications Inc. (CHTR), the cable-TV provider that emerged from bankruptcy in 2009, and Energy Future Holdings Corp., the Texas power producer struggling with $36.6 billion of long-term debt, are among companies that have sold $29.6 billion of speculative-grade securities this month. That compares with an average $8.4 billion in August sales for the past five years, according to data compiled by Bloomberg.

Companies are tapping into an unprecedented $44.9 billion of cash that has poured into funds that buy junk bonds in 2012 as the fourth year of near-zero short-term interest rates prompts investors to put their money into higher-yielding assets. Issuance accelerated even as the pace of earnings at speculative-grade companies slowed in the second quarter and as U.S. unemployment held above 8 percent for the 42nd month.

It was a languidly positive day for the Canadian preferred share market, with PerpetualPremiums up 7bp, FixedResets gaining 1bp and DeemedRetractibles flat. Volatility was minimal. Volume was a little strange. There were a fair number of issues trading over 100,000 shares, but overall the number of issues trading over 10,000 shares was … well, a little better than some of the recent days, but still pretty quiet. My guess is that a few big boys are shuffling their holdings, but Joe Average has gone fishing.

This entry was posted on Friday, August 17th, 2012 at 1:22 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.