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High-yield bond supply pressures investors, risk premiums near 5-month high
September high-yield issuance reached $38.5 billion as a $10 billion SoftBank deal added to a busy junk-bond calendar, Goldman said.
A surge in US high-yield corporate bond supply is starting to overwhelm debt investors and is driving up risk premiums, according to Goldman Sachs Group Inc.’s head of credit strategy, as cited by LiveMint Markets.
LiveMint Markets reported that September issuance had reached $38.51 billion as of Friday, after a string of large junk bond offerings including a $10 billion deal from SoftBank Group Corp. lifted the month’s total.
The pressure extends beyond high yield, with LiveMint Markets noting that Paramount Skydance Corp. is seeking to borrow $44.4 billion of investment-grade and high-yield bonds this week, while a heavier pipeline later in the year and rising bond yields add strain.
As yields climb, LiveMint Markets said Goldman expects corporate bond spreads to face pressure, noting the extra yield investors demand for holding corporate junk notes over Treasuries widened by 12 basis points to 294 basis points.