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Investor demand for corporate paper pushed yields on one of the riskiest tiers of debt to the lowest level in nearly two years on Tuesday.
Yields on triple-C rated US corporate debt fell to 10 per cent on Tuesday, the first time it has hit that threshold since April 2015, according to data from Bank of America Merrill Lynch. Yields on the debt, which are deep within speculative territory, fall as bond prices rise.
The drop in yields accompanies a global search for income, as roughly $9.7tn of sovereign and corporate debt trades with a yield below zero. While that figure has fallen from a peak of nearly $14tn last September, the higher yields offered on bonds sold by lowly-rated US companies has proven enticing.
Earlier this month, the average price of a bond within Bank of America’s triple-C and lower US index eclipsed 90 cents on the dollar. It marked the first time the triple-C debt had surpassed that level since March 2015.
Interest in the debt has also been buoyed by the so-called Trump Trade, in which potential government stimulus and tax cuts are expected to spur faster global growth and higher inflation. That in turn is thought to bolster sales prospects for a swath of high-yield companies.
More than $11bn has poured into high-yield corporate bond funds in the US since the election of Donald Trump last year, according to flows tracked by EPFR. Funds purchasing higher rated investment-grade corporate bonds have counted $7bn over the same period.