Many big US companies are now using the benefit of record-low yields and increasing demand for corporate bonds. According to Wall Street Journal there were 21 companies with investment-grade credit ratings to raise 27 billion dollars only on Tuesday and about the same amount of companies are in the pipeline for the rest of the week.
Investors are eager to invest in big, well-know brands like Apple which yields better than the negative government bonds. The 10-year Treasury bond yield is now 1,46 % when it was trading around 2 % in July. In the euro-area, the 10-year bond is trading at -0,59 %, while it was -0,52 % a month ago.
The US airline company United Airlines (UAL) sold 1,2 billion dollars of secured bonds to finance the purchase of new aircraft. Apple (AAPL) Walt Disney and Deere (DE) all issued 30-year bonds with yields below 3%. For example the Walt Disney bond yield was 2,83% according to WSJ information from MarketAxess.
The companies can use the new debt to refinance the existing debt with lower yielding bonds and they can also extend the maturity of the debt.
The US central bank, the Federal Reserve might also make a new rate cut during this month. According to CME market estimates, the Fed is expected to lower the interest rates on a quarter-percentage-point at September policy meeting on the 17-18th.