Crossmark Global CIO gives his take on Blackstone limiting redemptions and on what investors should watch for on 'Making Money.'
Companies with top credit ratings are returning to the bond market to bolster their cash stockpiles while fretting over persistent inflation and sluggish economic growth. That’s giving investors a chance to buy the safest bonds at stepped-up yields due to rising interest rates.Warren Buffett's Berkshire Hathaway announced a 115 billion yen ($842 million) bond offering this month, while Duke Energy is out with a $1 billion offering. Amazon sold $8.25 billion of bonds in November.
"Bond markets in general have begun to behave in a recession-signaling way," market expert Adam Kobeissi told FOX Business. "For the first time all year, we are seeing bond prices up significantly while stocks fall, and this comes just one month after tech layoffs began."The author of the Kobeissi Letter, a weekly commentary on the global capital markets, noted tech companies have already laid off more than 20,000 employees, more than the total during the entire dot-com bubble.
"Right now, it’s almost damage control and it’s certainly an indicator of a negative outlook on the markets and the economy in general for 2023," said Mina Tadrus, CEO of Tadrus Capital, a high-yielding and fixed-income quantitative hedge fund generating returns of 2.5% per month.
Once one company begins layoffs, it’s easier for others to follow, Tadrus told FOX Business: "It’s almost socially acceptable and everyone understands that."
Kobeissi expects corporations to feel recessionary pain into mid-2023 at a minimum.
"As interest rates continue to rise and consumers are struggling on the spending front, we expect more layoffs and potentially even more investment grade bond issuances to help corporations build a safety cushion as the recession worsens," he said.
Certified financial planner Adam Soloff of Soloff Wealth Management says rising interest rates have given his firm the chance to add top-rated bonds to certain client portfolios now that rates are high enough to generate meaningful returns.
"Given the increase in yields, especially for clients prioritizing safety and income, we have been allocating larger portions of our portfolios to investment-grade corporate bonds, as well as tax-free municipal bonds for those in higher tax brackets," Soloff told FOX Business.
The move by top-rated companies into the investment-grade bond market is expected to continue, regardless of economic conditions or what the Federal Reserve does with interest rates. Many companies have bonds maturing in the near term. Others may look to refinance before the Fed completes its current interest rate hiking cycle.
