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Oasis for Bonds: Investment-Grade Issuance Soars
Big Names Fuel Rise To Best August Ever As Junk Nears Lows
Wall Street Journal, September 4, 2007; Page C6

Issuance of investment-grade corporate bonds in the U.S. soared past $70 billion in August, up from $24 billion in July. It was the biggest August on record and the sixth-biggest month ever...

Many companies shifted some of their borrowings from the choppy market for short-term commercial paper to longer-term corporate bonds, locking in low rates while they could....

Investors -- including mutual funds, foreign central banks and wealthy individuals -- bought highly rated corporate debt and earned a higher interest rate to reward them for risking money during a turbulent period in the market. Overall, corporate investment-grade bond issuers paid an average yield of just above 6% in August, up from 5.64% in May...

While the high-grade market bustled, the market for riskier corporate junk bonds nearly shut down....

Analysts say the investment-grade bond sector isn't in the clear yet. The market could take a step backward if more hedge funds run into trouble or if the Fed declines to cut its benchmark federal-funds rate at its Sept. 18 meeting.

A potentially bigger problem: If too many companies rush to issue high-grade and risky junk bonds in the weeks ahead, it could create an oversupply that could force issuers of all kinds to pay painful rates. [end quote]

The rush of companies to issue high-grade credit must be significantly higher than the demand from investors, to push the interest rates up so much.

So, is this an opportunity? Or, would it be worth waiting more?

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