By Shankar Ramakrishnan and Davide Barbuscia
NEW YORK (Reuters) – The U.S. corporate bond market is set to break new issuance records as borrowers take advantage of lower financing costs than last year and investors, emboldened by the prospect of an economic “soft landing,” pile into the asset class.
The Federal Reserve recently poured cold water on market expectations of imminent interest rate cuts, though its policymakers have projected that rates will fall this year as inflation continues to slow despite ongoing economic strength.
For investors, this represents an opportunity to load up on corporate bonds that pay high yields but have a relatively low default risk in the absence of a recession.
“It’s a great time to be in fixed income,” said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management.
“Great starting place in terms of all-in yields; a great place to be in terms of the forward path of monetary policy, which is cutting, rather than hiking; and there is a more benign outcome as the recession probability has greatly decreased,” she said.
Issuance of bonds by companies rated investment-grade surged above $196 billion last month, making it the busiest January on record. This record issuance may be repeated this month, with BofA Global estimating nearly $160 billion to $170 billion in just investment-grade rated bond supply, which would make it the busiest February ever.
