The 'Electronics for Bonds' Trade Explains Why Corporate America's Borrowing Costs Keep Falling
Foreign buying behind tightening investment grade spreads, says BofA.
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The past year has seen a Chinese currency devaluation, a rate hike by the Federal Reserve, 'Brexit,' and a failed coup.
But after risk premiums on the debt sold by U.S. companies jumped amid the oil price downturn and the market turmoil that characterized the start of 2016, spreads on investment-grade corporate bond have now tightened to right where they were 12 months ago, a Bank of America Merrill Lynch team led by Hans Mikkelsen observes. Investors in bonds sold by U.S. companies with relatively stronger balance sheets might have one big group to thank for the ability of their market to buck a growing laundry list of potential headwinds.