Scott Kimball, chief investment officer at Loop Capital Asset Management, said: "It was as if everyone woke up on January 1 and realized that yields were at their highest levels in nearly 20 years.""From a Capital structure perspective, it's hard to ignore that given the pretty high stock valuations."
Investors flood to highly-rated corporate bonds ahead of Fed rate cuts
A broad measure of yields on investment-grade corporate bonds soared to nearly 6.5% late last year, hitting a new high in more than 14 years, according to data compiled by Bloomberg.
Procter & Gamble's bond offering comes amid a frenzy in the primary market, with new issuances up 32% year-on-year so far in 2024.
Investors are increasingly speculating that the Federal Reserve will implement monetary easing sometime this year. However, amid the uncertainty about the timing of interest rate cuts, investors have begun to buy new high-rated bonds in large numbers, because high-rated bonds typically have a long duration and will become attractive investments if interest rates start to fall.
The average extra yield investors hold on corporate bonds relative to the U.S. Treasury Bond has fallen to 96 basis points this week, slightly below its lowest level in two years. Meanwhile, the spread on P&G's 10-year bond narrowed from about 55 basis points in earlier discussions, according to a person familiar with the matter.