Crazy week: Treasurers busy piling cash
A look at the current top stories with US-based news site Treasury & Risk shows how the work at corporate treasuries has shifted drastically this summer – to make the most out of plummeting borrowing costs.
US investment-grade corporate bonds alone saw a record $74 billion of issuance in last week alone, with active companies including Coca-Cola, Walt Disney and Apple, a Bloomberg article in Treasury & Risk notes.
While treasury bonds will always get more attractive when stock markets rattle – as they did in August – the effect on corporate borrowing costs could have been less predictable. For investors, a corporate bond placement is, after all, a placement with a corporation. And do these stand stable enough to deserve a lowered bond interest rate these days?
The answer is yes: even firms with less-than-great credit ratings are meeting opportunities for cheaper borrowing, despite increased volatility in their stock values. US junk bond notes in the highest-yield level tier called BB was spotted last week at 4.07 percent, a near record low.
Holidays cancelled
Accordingly, with money now offered at bargain prices to basically anybody, companies have gone on the corporate-treasury equivalent of a summer shopping spree: selling corporate bonds by truckloads.
Already on 23 August, Treasury & Risk published an article about companies cancelling summer vacations for finance teams busy with selling bonds.
Eventually, in September, Apple was reported to have borrowed $7 billion, in the light of record low treasury yields even of maturities as long as 30 years. This could have been notable in itself – but was no less so for a company that is already sitting on a whopping $200 billion pile of cash. Nice to have, one might assume.
Stock buybacks? Soo last year.
The list of interesting aspects of this new low-yield landscape seems never-ending. Another recent articles note that stock buybacks don’t seem to pay anymore, and are thus becoming less frequent. And yet another goes into details on how franchising corporations, and others, are securitising virtually all kinds of assets, such as royalties and intellectual property, to be able to mortgage them for better credit ratings.