Q1 Corporate Bond Issuance Sets Record

April 2, 2001 (PLANSPONSOR.com) - Treasury departments at American corporations have been busy, issuing a record $202 billion in investment-grade bonds in the first quarter, up from $112 billion a year ago.

That was 59% better than the previous quarterly record of $127 billion sold in the third quarter of 2000, according to Thomson Financial Securities Data. Lower borrowing costs and stock market volatility created an attractive environment for the investments.

Safer Returns?

Companies took advantage of lower borrowing costs as the Federal Reserve cut rates three times in the three-month period, while investors unnerved by stock market losses eagerly bought bonds.

Investment-grade corporate bonds returned 4.09% including interest during the quarter, Merrill Lynch said, while the return on safer but lower-yielding U.S. Treasuries was 2.09%, according to Reuters.

Intermediate bond funds returned 2.7%, according to Morningstar. High-yield, or “junk” bonds, earned 5.88%, while the funds investing in them returned 3.78%.

Worldwide high-yield bond issuance also fared well, as some 94 issues worth $28.9 billion were sold in the quarter, up from $22.3 billion in the same quarter a year earlier.

Interest in convertible bond issuance fell with the stock markets, slipping to $19.5 billion in the first quarter versus $21 billion in 2000’s first quarter.