“Xerox Corp., the world’s biggest copier maker, and wireless telephone service provider Nextel Partners Inc. led borrowers in the biggest week for U.S. junk-bond sales in more than two years, as investor demand for the lowest-rated securities pushed down debt costs. Borrowers rated below investment grade - considered to have a higher chance of default - sold about $6 billion of debt this week, the most since May 2001… Offerings by companies rated lower than Baa3 by Moody’s Investors Service and below BBB- by Standard & Poor’s made up almost half the week’s $13.3 billion of total corporate issuance in the U.S… In a sign of investors’ increased appetite for risk, about 19 companies rated at or lower than Caa1 by Moody's and CCC+ by S&P - in the lowest third of the junk-ratings scale - have issued bonds so far this year. That’s the same number as was sold in all of 2002, according to Bloomberg data. ‘Six months ago, there was no chance for those kinds of issues,’ said Mike Difley…(of) American Century Investment Management… ‘People are looking for yield and are moving down the credit-quality spectrum to find it.’ Overall, junk-rated companies have sold $69 billion of debt this year, up from $40 billion in the same period a year ago… The difference in yield between junk bonds and Treasuries has dropped to 6 percentage points on average, the lowest so-called spread since July 2000, according to Merrill Lynch & Co. data. The average absolute yield to maturity on the debt, at 8.9 percent, is the lowest since January 1998…”
Bloomberg News Service
June 26, 2003
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