Key Points
Nov 30 (Reuters) - Tight credit spreads and strong investor demand for highly-rated bonds has prompted some U.S. companies to refinance debt maturing in the next few years rather than wait for expected U.S. interest rate cuts in 2024 to lower borrowing costs...
November saw a sharp rise in refinancing activity as Treasury yields fell and average spreads on investment-grade debt - the premium charged over Treasuries - touched 111 basis points or the lowest level this year, according to ICE BAML data...
"In that vein, some borrowers are of the mind to de-risk at least a portion of their 2024 funding needs in this current window," she said.. Doubts that debt issuance conditions will be as strong in 2024 as they are now, with markets still divided on the direction of interest rates and the economy, have also driven the interest in doing deals now...
Even if companies waited for rate cuts in 2024, declines in all-in funding costs may not necessarily follow, as credit spreads could then widen, said Amol Dhargalkar, managing partner at Chatham Financial...
"If spreads continue to compress, we will see additional supply entering the market, but we expect much of new supply to be focused on refinancing activity," said Steven Oh, global head of credit and fixed income at asset manager PineBridge Investments.. Reporting by Matt Tracy; additional reporting by Shankar Ramakrishnan and Davide Barbuscia; editing by Barbara Lewis..
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