Timothy A. Clary / AFP / Getty Images
- Sales of investment-grade corporate bonds passed the $ 1 trillion mark at the fastest pace in history. Bloomberg reported Thursday.
- The Federal Reserve's unprecedented move to buy corporate debt helped fuel the buying spree by eradicating fears of credit health and driving historical inflows.
- According to Bloomberg, only $ 548 billion in bonds were sold at the same time last year, and the $ 1 trillion level was only reached in November.
- You can find more stories on the Business Insider homepage.
The Federal Reserve's historic market relief led to record-breaking corporate bond sales hitting the $ 1 trillion threshold. Bloomberg reported Thursday.
The debt surge started in March when corporate liquidity requirements led to unprecedented bond sales. The Fed’s announcement on March 23 that it would begin buying corporate bonds eased fears of creditworthiness and further fueled bond issues in the coronavirus crisis.
Thursday solidified a new debt market record, bringing total sales of investment-grade corporate bonds to $ 1 trillion at the fastest pace in history. According to Bloomberg, only bonds worth $ 548 billion were sold at the same time last year. It was not until November that investment grade sales in 2019 exceeded $ 1 trillion.
While the Fed's move into corporate debt resulted in multi-billion dollar inflows, the central bank has yet to buy a single bond. The Monetary Agency began buying exchange-traded corporate bond funds on May 12. Chairman Jerome Powell said in recent Senate statements that a facility for buying individual bonds will open before June.
While keen interest in corporate debt has helped keep businesses alive through the pandemic and months of closures, it has also happened because businesses were already heavily in debt. The Fed and the Treasury are at higher risk of suffering losses if borrowers continue to default. Market experts are also concerned about how the bond market could react when the central bank starts buying.
Howard Marks, co-chair of Oaktree Capital, said in mid-May that the optimistic prices in the market were "artificially supported by the Fed's purchase" and that he did not think the level would hold if central bank aid eased.
Boeing's $ 25 billion offer was the decisive factor in previous bond sales in 2020 on April 30. The bond sale replaced Boeing's need to receive state aid and had a record cash burn in the first quarter.
The $ 19 billion sale of T-Mobile is the only major offer that results from a merger or acquisition. The sale made it easier to buy the rival Sprint.
Read more about the market coverage of Markets Insider and Business Insider now:
The U.S.-China trade war has deducted $ 1.7 trillion from the market value of U.S. companies, according to the Fed report
JPMORGAN: The economic reopening is not enough to bring about a recovery in consumer spending, as credit card data shows
A part-time real estate investor quit his traditional job 5 years after starting his first business. He shares his problem-free strategy that enables him to travel around the world with his 6 children.
(tagsToTranslate) markets (t) Wall Street (t) corporate bond market (t) corporate bonds (t) bond market (t) Federal Reserve (t) bond issue (t) bonds (t) debt markets (t) debt market (t) corporate debt