If you needed any more proof about how risk averse investors have become, look no further than the corporate bond market.
With interest rates at record lows, corporate America is coming to the debt market in droves. And investors seem to have an almost insatiable appetite for their debt.
So far in August, almost $50 billion of debt have come to market. A record start for August. Just Tuesday alone, more than $12 billion worth of corporate paper hit the Street.
Last week, close to $32 billion was priced, which was the largest amount of any week in 2010 and the fourth largest ever. The number was $57 billion last month, the biggest July in 10 years.
Some of those bonds come from companies trying to capitalize on low rates to refinance higher interest debt on their balance sheets, and some of it is to accumulate a war chest of cash to either spend on capital goods and equipment or perhaps to do acquisitions later.
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But investors don't seem to care what the reasoning is. They are looking for protection against a falling equity market and are willing to take a lower yield to be higher on the capital structure.
(For a contrarian view, click here: "Why Stocks Are the Only 'Asset Class of Choice'.)
Wednesday alone, the International Lease Finance Corporation, the aircraft leasing arm of AIG added a fourth tranche to its multi-part offering.
In just one hour, it was upsized twice because the demand was so strong. AIG plans to use that money to repay the loans it owes the Federal government.
In what is being called an investor frenzy, AnadarkoPetroleum was able to sell $2 billion worth of notes that did not have creditor protections against lawsuits stemming from the BP oil spill.
It is another example, analysts say, of how the corporation seems to be calling the shots over the investor. But at a yield of 415 basis points above the Treasury equivalent, investors are apparently yearning for yield to such an extent they are willing to look the other way when it comes to protection.
A key question for investors is whether the sour tone in the stock market will translate into a softer issuance calendar for corporate bonds. If it does, analysts predict that that will only increase the investor demand for those issues currently on the calendar.