Companies' Access To Financing Hits An Air Pocket

Corporate debt issuance has plunged. According to Bloomberg companies worldwide only sold $15 billion of debt this month, a 62% drop from the equivalent period in April and an 83% drop from the average during the last year. Corporate bond spreads vs. government debt soared last week, yet this was more due to the massive rally in sovereigns than a rout in corporates.

Fund flow data from EPFR shows a parallel trend of weakness.

EPFR, May 7th:

Flows into Global Bond Funds topped the $2 billion mark despite their heavy developed Europe weighting, allowing this fund group to extend their current inflow streak to 54 straight weeks. US Bond Funds posted their 60th consecutive week of inflows, but the total was the lowest since the last week of March, 2009, as Inflation Protection Bond Funds experienced large redemptions.

Yet not all bonds flows are alike. Emerging markets continue to attract record amounts of capital, so that’s where some of the demand has shifted when it comes to fixed income.


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