Companies Defy Logic with Record Bond Issuance and Tighter Spreads: What Gives?

Debt-fueled stock buybacks, other ledger tricks could continue

by Ciara Linnane
Market Watch

There is something fishy going on in U.S. credit markets and it may give stocks at least a temporary boost.

August, typically a sleepy month for corporate bond issuance heading toward the Labor Day holiday weekend, has seen record issuance in its first six days, according to New Albion Partners LLC.

The flurry is messing with the yield spreads that help bond investors contemplate risk. And for stock investors, this phenomenon means that the debt-fueled share buyback craze may be revived.

Companies sold $70 billion of bonds in the six-day stretch, already more than half the normal monthly average issuance of $125 billion. Why sell?

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