Thursday, February 2, 2012
Corporate Bonds: !!
Rosenberg Today: The really big news — and to little fanfare — is in the corporate bond market. The flows have been amazing as the thirst for income refuses to be quenched. According to today’s WSJ, investors added $9 billion to their exposure to U.S. corporate bond funds in December and almost $7 billion according to the cumulative weekly data through January. The returns have been great — 3% so far this year in the high-yield space; courtesy of a nice decline in average yields to 7.5% from 8.6% in mid-December (the yield slide in Eurozone has been even more dramatic ... from 10.5% to 8.4% and a 5% year-to-date total return). Part of the allure here is the knowledge that after selling an unprecedented $600 billion of bonds in 2010 and 2011, American CFO’s have very little in the way of refinancing needs going forward (new issue activity of $18.8 billion in January was down 31% from year-ago levels). Furthermore, portfolio managers in this space are sitting on a lot of cash to put to work (7.8% liquidity ratio now versus 6.4% a year ago).