6th August, 2020
Central banks' hoses are working
As long-term U.S. Treasury yields continue to sink toward zero, borrowing rates for top investment grade companies are following suit. Alphabet borrowed a billion dollars this week for 5 years at just 0.45% - a rate that matched the record 5-year low for a private firm achieved by Apple in 2013. And investment grade bond indexes continue to climb to record highs. Borrowing rates are cheaper for top firms in Europe - some 12.2 billion euros of euro-denominated corporate bonds paying a zero coupon have been sold by 17 companies including Siemens, Deutsche Bahn and Nestle in 2020. Investors remain wary of credit downgrades and blowups in places, but borrowing is virtually free now for many blue-chips likely to survive the pandemic.
Chart by Ritvik Carvalho and commentary by Mike Dolan.
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