With only two-thirds of the year behind us, investment-grade corporate bond sales could even eclipse last year’s record. From Bloomberg:
Investors are embracing investment-grade debt, which has gained 9.49 percent this year after losing 0.7 percent in 2015, according to the Bloomberg Barclays U.S. Corporate Bond Index. Sales in August, which are typically slow due to the summer holidays, topped $115 billion making it the busiest August in at least 12 years, according to data compiled by Bloomberg. More than $962 billion of the debt has been issued this year and at that pace sales may reach the $1 trillion mark in September.
There’s plenty more where that came from, too. Analysts expect a healthy amount of sales through the end of this year as well:
Issuance is expected to remain strong going into September. The pipeline for bond deals next month will be at $120 billion, according to an Aug. 29 report by Bank of America Corp. Companies expected to tap the bond market include Abbott Laboratories, which plans borrowings to pay for its purchases of St. Jude Medical Inc. and Alere Inc.
Companies aren’t just borrowing to fund acquisitions or R&D, either. Many U.S. firms are issuing bonds simply to flip the funds back to shareholders in the form of dividends and buybacks — although buybacks have been slowing as of late.
ETF investors looking to ride the wave of high-quality corporate bonds can do so via the LQD (Expense Ratio: 0.15%). The iShares IBoxx $ Investment Grade Corporate Bond Fund ETF (NYSE:LQD) was mostly flat in afternoon trading today at $123.93 per share. The largest corporate bond ETF by assets, LQD has risen 8.7% year-to-date and yields a healthy 3.20% — about 1.69 percentage points higher than 10-Year Treasury Bonds.