Listen to this article
This is an experimental feature. Give us your feedback. Thank you for your feedback.
What do you think?
Riskier US corporate debt regained some of its footing on Tuesday, with a deluge of bond sales expected over the coming days despite the weight of falling oil prices.
At least 10 bond sales from speculatively rated groups — companies deemed riskier than their investment-grade counterparts by the major rating agencies — were being marketed in the US on Tuesday or set for marketing roadshows later this week.
The uptick in activity follows a volatile week for junk bonds amid declining oil prices. Since the end of April, Brent crude — the global oil benchmark — has declined nearly 6 per cent. It is off roughly 15 per cent from its January high. The energy sector is a key component of the junk bond market, representing 14 per cent of Bank of America Merrill Lynch’s high-yield US corporate bond index.
The sales include a $700m bond offering from hospital group Community Health Systems, a $500m deal from chemical company Chemours and a $1bn bond sale from Fortescue, the Australian iron ore company. In total, the deals — including a $125m bond offering from independent oil and gas company Resolute Energy — were expected to raise more than $4bn from investors, according to FT calculations.
While sales of high-yield corporate debt in the US are up more than 30 per cent from a year earlier — crossing the $100bn mark last week — they remain below the pace in 2013, 2014 and 2015, according to Dealogic.
Premiums investors demand to hold the debt have slid from recent highs, with the so-called spread — the difference in yield on a high-yield corporate bond and that on a US Treasury of a similar maturity — falling 36 points from a March peak to 380 basis points on Monday.
“Aside from weakness in commodity related [bond] issues, the market is relatively stable,” said David Daigle, a portfolio manager with Capital Group. “A stable Treasury market, supportive equity market and…volatility that remains relatively well-behaved have created a great backdrop for high yield debt.”