The bank estimates that investors have about US$74 billion more cash to reinvest than there have been bonds sold by companies. Without enough new notes to buy, money managers are turning to the credit derivatives market to make up the difference, gaining exposure to more than US$110 billion of debt through the main North American high-grade credit-default swap index, according to DTCC data compiled by Barclays Plc.
Investors in US corporate bonds are earning so much money from their interest payments and reinvesting it so quickly that companies can’t keep up with the demand.
Blue-chip businesses have sold more than US$1 trillion of bonds this year through August, data compiled by Bloomberg shows. Yet money managers have received even more than that in interest and principal payments, according to BNP Paribas — most of which they will pour back into the market.
