Bloomberg Claims Corps Selling Bonds
A new Bloomberg bolsters our theory that repatriation-related flows will impact the short-term bond market more than the money markets. The piece, "Apple, Oracle Dump Bonds and Create $300 Billion Hole in Market," tells us, "As U.S. tax cuts prompt Apple Inc. and other tech companies to bring home their overseas cash hoards, it's leaving a void in the market for short-term corporate bonds, where those firms had invested much of the money. That's now making it more expensive for other companies to borrow. Once the biggest buyers of short-dated corporate debt, Apple along with 20 other cash-rich companies including Microsoft Corp. and Oracle Corp. have turned into sellers. While they once bought $25 billion of debt per quarter, they're now selling in $50 billion clips, leaving a $300 billion-a-year hole in the market, according to data tracked by Bank of America Corp. strategists." It adds, "The reversal is adding pressure to a market already buffeted by Federal Reserve rate hikes. Yields on corporate bonds with maturities between one and three years have jumped 0.85 percentage point this year to 3.21 percent, close to the highest in almost eight years, Bloomberg Barclays index data show." Richard Saperstein, managing director at HighTower Advisors's Treasury Partners, disagrees, saying, "That wave of money, the directional change of fund flows hasn't really kicked into gear yet.... If the flow of money accelerates further and there isn't enough absorption, spreads will widen."
