How Companies Spent Their Summer Vacation: Selling Bonds
As U.S. interest rates tumbled, corporations wasted little time rushing into the market.
Simple recipe for a bond frenzy: See low yields. Borrow.
Photographer: Paul Yeung/BloombergBy all accounts, it was supposed to be a sleepy August for the U.S. corporate bond market.
Three weeks ago, the thinking went something like this: Sure, the Federal Reserve would cut its benchmark lending rate on July 31, in what Chair Jerome Powell would call a “mid-cycle adjustment.” But Treasuries were already pricing in such a move on the short end. Further out on the curve, the 30-year yield was about 2.6%, still more than 50 basis points away from its all-time low. Ten-year yields were about 2%, which seemed like a comfortable range for both buyers and sellers. For company finance officers, it had the makings of a sellers’ market but one that would be around once summer drew to a close.