Magazine article Global Finance

THE AMERICAS: High-Yield Issuance May Keep Growing

Magazine article Global Finance

THE AMERICAS: High-Yield Issuance May Keep Growing

Article excerpt

While US corporate bondmarket participants expect overall issuance to decline in 2004 as interest rates go up, high-yield issuance likely will remain strong and could even increase slightly.

A healthier economy will make it more attractive for companies to issue bonds in the high-yield market as their credit outlook improves, according to a survey by the Bond Market Association, with offices in New York, Washington and London.

"Thanks to a stronger economy, which began to exhibit measurable progress in the second half of last year, our members are expecting moderately higher interest rates during the course of 2004 and a corresponding expected drop in bond issuance," says Micah S. Green, president of the association.

The past two years witnessed record issuance in the bond markets, and it is unrealistic to expect that to continue, according to Green. The association represents securities firms and banks that underwrite, trade and sell debt securities in the US and globally.

Association members forecast that corporate bond issuance will drop about 31% this year compared with 2003, but that high-yield issuance will rise 2.5% to $125 billion.

Federal Reserve policy is expected to remain accommodative for some time, despite the Federal Open Market Committee's decision to drop the phrase "considerable period" from the text of its press release following its last meeting.

"As much as we believe that rates should and will move substantially higher by year-end, it will ultimately be impatient bond investors rather than a patient Fed that will pave the way to higher rates," says Kenneth L. …

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