Monday, August 30, 2010

Bull Market in Speculative Grade Corporate Bonds

Bloomberg reported:

Investors are putting their money in junk-bond mutual funds as yields on U.S. Treasuries fall amid signs that the economy may slip back into recession. Flows into the funds provided money managers with cash to buy new issues as sales this month of speculative-grade company bonds rose to the most on record for an August, said Manny Labrinos, who oversees $1.8 billion of the debt at Nuveen Investment Management.

“The big factor has been all the money that’s been flowing into the sector,” said Labrinos, who is based in Los Angeles. “We’ve been bullish for a while but we’ve still been surprised by the extent to which people have been willing to put money into credit.”

This stuff that wouldn't move during the financial crisis. Uncle Sam primed the pump via PPIP and giving companies huge tax breaks for buying back debt for pennies on the dollar.

Beneficiaries include The Carlyle Group, which profited from debt buybacks, acquisitions and new issuance. NBTY, the huge vitamin/supplement maker, plans to sell $900 million in junk bonds to finance Carlyle's takeover. Credit is back for the PEU boys. (PEU stands for private equity underwriter.)