There have been growing concerns gripping markets as Treasury yields keep rising, but, for US companies, it is clear that the right time to borrow is now. This comes as inflation fears continue to increase despite the economy seemingly stabilizing.
Companies fear they might miss on borrowing window
The rise in long-end rates to the levels witnessed almost a year ago has fuelled concerns that the historic borrowing window is soon closing. Concerns of missing out have pushed some companies to accelerate debt issuance plans, to either lock in funding for acquisitions or refinance upcoming maturities. Some firms are enjoying close to record low yields despite the unattractive borrowing rates. Most importantly, a strong economic recovery could boost earnings, which keep defaults low.
So far, various high-grade borrowers have announced bond sales with Teledyne Technologies Inc. and Bank of America Corp likely to bring multi-billion dollar acquisitions. Already Teledyne is raising cash through a five-part offering to fund acquisitions and repay borrowings, with American Airlines Group Inc. also triggering a highly anticipated $7.5 billion debt sale.
GE bonds jump on the expected sale of the air leasing unit
On Monday General Electric (NYSE:GE) bonds rallied 10bp-27bp tighter in the secondary market following reports that the company will be selling its air leasing unit for $30 billion to AerCap. The industrial company and its financial subsidiary GE Capital, which are rated Baa1/BBB, have been str9oggloing to get the debt load under control following CEO Larry Culp’s restructuring strategy.
GE’s 4.418% 2035s bonds were the most traded and moved 37bp tighter to 158bp over Treasuries. Similarly, the company’s most recent bond offering, which was the $1.5 billion 30-year bond it prices in June, traded at 15np tighter at 147bp over Treasuries.
Treasury bonds experience sudden sell-off of Fed Chair’s comments
There was a sudden sell-off in US Treasury bonds and equity following Federal Reserve Chair Jay Powell’s pronouncement of keeping monetary policy steady despite growing inflation and economic recovery signs. Powell said that the Fed will be patient in withdrawing recovery support considering the labor market is still far from the labor market’s target of full employment with little progress in recent months.
These comments failed to alleviate concerns that the Fed has been slow to react to the increase in inflation expectations and Treasury bonds. Powell said that the Central Bank was watching market movements, but he didn’t signal a possible intervention to cap Treasury bond yields adding that it will take more to concern him.
Fitch confirms Neergy Energy’s $475 million unsecured notes at “BB.”
Fitch Ratings has confirmed Neerg Energy Ltd.’s rating of $475 million unsecured notes due 2022 to be “BB.” The notes’ rating reflects the credit profile of the restricted group (RG) of ReNew Power Private Limited owned subsidiaries. Notably, RG has 606MW operating capacity in wind and solar power generation in India. India Green power Holdings (IGPH), whose ownership is not associated with ReNew raised $460 million in notes last month.