James Grant, of the Grant’s Interest Observer, once said that reaching for yield can be more dangerous than reaching for a razor blade in the dark. Wolf Richter details the latest razor blade grope, from wolfstreet.com;
Investors are still lusting after yield, any kind of visible yield, as long as it is positive, no matter what the risks, and they’re throwing record amounts of money even at junk-rated companies.
Nevertheless, stung by a series of bankruptcies and defaults, investors are now drawing the line at a growing coterie of energy companies. These companies are dependent on a constant flow of new money that they burn through to keep operating. When that new money has second thoughts, the companies wither. That’s now happening. But other junk-rated companies are shoving as many junk bonds out the door as possible before that door closes.
In March, $38 billion in junk bonds were sold, S&P Capital IQ/LCD reported. It was the best March ever.
Following a record-breaking February, when $32.1 billion in junk bonds were issued, and a tepid January, it brought the total for the first quarter to $91.6 billion, up 22% from the already hot pace last year. It was the largest Q1 tally since 2012.
To continue reading: Wall Street Sells Junk Bonds, CLOs at Record Pace
