Bloomberg News

Global Corporate Bond Yields Decline to Record After Fed Minutes

August 23, 2012

Yields on corporate bonds worldwide fell to a record low yesterday after Federal Reserve policy makers signaled readiness to boost stimulus options.

Borrowing costs for the most creditworthy to the riskiest companies fell to an unprecedented 3.76 percent yesterday, from 3.8 percent on Aug. 21, according to Bank of America Merrill Lynch index data. Yields on global investment-grade debt dropped to a record 2.97 percent.

Rates are falling, with relative yields on company bonds reaching the narrowest level in a year, after many members of the Fed’s policy-setting Federal Open Market Committee said further action would probably be needed “fairly soon” without evidence of “substantial and sustainable” improvement in the country’s economic recovery, according to minutes of the July 31-Aug. 1 meeting.

“Rates markets shifted into full-on rally mode” after the Fed signaled “an increasing bias toward additional stimulus,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, wrote today in a report.

The extra yield investors demand to own global corporate bonds of all ratings rather than government debt narrowed to 261 basis points Aug. 21, the lowest level since August 2011, Bank of America Merrill Lynch index data show. The gauge widened 1 basis point to 2.62 percentage points yesterday.

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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