1 00:00:01,560 --> 00:00:05,040 Speaker 1: You're listening to Taking Stock with Pim Box and Kathleen 2 00:00:05,080 --> 00:00:10,240 Speaker 1: Hayes on Bloomberg Radio. The reach for yield it's something 3 00:00:10,280 --> 00:00:14,680 Speaker 1: we have seen around the world as investors look at 4 00:00:15,360 --> 00:00:20,200 Speaker 1: very low yield on corporate bonds, on government bonds, negative 5 00:00:20,280 --> 00:00:23,160 Speaker 1: yields in some countries and say where can I get 6 00:00:23,280 --> 00:00:28,600 Speaker 1: some income. Well, junk bond buyers are certainly hard at 7 00:00:28,640 --> 00:00:32,479 Speaker 1: the hunt, as Claire Boston reports in her story today, 8 00:00:32,560 --> 00:00:35,080 Speaker 1: and she's joining us now to talk about what's driving 9 00:00:35,120 --> 00:00:37,760 Speaker 1: it and where it's heading. Claire, welcome back, Thanks for 10 00:00:37,800 --> 00:00:42,519 Speaker 1: having me so uh tell us so what what the 11 00:00:42,600 --> 00:00:45,760 Speaker 1: trend has been, how big is it and and how 12 00:00:45,960 --> 00:00:50,440 Speaker 1: risky is it? Well, So, junk bonds are issuance this 13 00:00:50,520 --> 00:00:54,080 Speaker 1: year is down quite a bit. UM. It's about down 14 00:00:54,160 --> 00:00:56,360 Speaker 1: from last year, and that's largely related to some of 15 00:00:56,360 --> 00:00:59,120 Speaker 1: the volatility around oil prices we saw earlier this year. 16 00:00:59,720 --> 00:01:01,480 Speaker 1: UM at issue ince since we've come back from the 17 00:01:01,560 --> 00:01:04,640 Speaker 1: Labor Day holidays has been very strong. Last week we 18 00:01:04,720 --> 00:01:07,160 Speaker 1: had the busiest week in the junk bond market for 19 00:01:07,400 --> 00:01:10,720 Speaker 1: new bonds since June, and this week is also looking 20 00:01:10,800 --> 00:01:13,200 Speaker 1: quite strong. UM. This morning we had a one point 21 00:01:13,200 --> 00:01:16,440 Speaker 1: seven five billion dollar deal from i MS Health Price 22 00:01:16,520 --> 00:01:19,200 Speaker 1: in both dollars and euros. Um, and we have a 23 00:01:19,280 --> 00:01:21,559 Speaker 1: number of other companies that may still sell this week. 24 00:01:22,120 --> 00:01:24,760 Speaker 1: And you have a number of energy companies that have 25 00:01:24,920 --> 00:01:28,880 Speaker 1: been wildly successful at selling debt. Tell us about that 26 00:01:28,920 --> 00:01:30,800 Speaker 1: segment of the market and why that might be just 27 00:01:30,880 --> 00:01:33,440 Speaker 1: a little bit of a head scratcher. Yes, it's very 28 00:01:33,480 --> 00:01:35,600 Speaker 1: interesting actually because some of these debts sales, some of 29 00:01:35,600 --> 00:01:37,920 Speaker 1: them have already sold, some of them are still being marketed, 30 00:01:37,920 --> 00:01:40,440 Speaker 1: are actually coming as crude has had a bit of 31 00:01:40,440 --> 00:01:43,080 Speaker 1: a down week. Um, it's a very i would say 32 00:01:43,480 --> 00:01:47,480 Speaker 1: case by case scenario for these companies. PDC Energy which 33 00:01:47,480 --> 00:01:49,360 Speaker 1: is a company that sold bonds earlier this week and 34 00:01:49,400 --> 00:01:52,240 Speaker 1: did quite well. Um, we'red was doing an acquisition. They 35 00:01:52,280 --> 00:01:55,080 Speaker 1: were going to gain some space in the Delaware basin 36 00:01:55,160 --> 00:01:57,960 Speaker 1: in Texas, which is a very hot area. From what 37 00:01:58,080 --> 00:02:02,160 Speaker 1: people were telling me, um an investors that Another reason 38 00:02:02,240 --> 00:02:04,520 Speaker 1: is that some of these companies are refinancing old debts. 39 00:02:04,600 --> 00:02:06,680 Speaker 1: So if you're a current bond holder and you still 40 00:02:06,720 --> 00:02:08,840 Speaker 1: like the name, a lot of them will just swap 41 00:02:08,840 --> 00:02:10,959 Speaker 1: out into the new debt. So, Carl, what is the 42 00:02:11,080 --> 00:02:14,639 Speaker 1: risk you talked in your story about PDC Energy and 43 00:02:15,320 --> 00:02:17,519 Speaker 1: the fact that it's a credit ratings four levels below 44 00:02:17,600 --> 00:02:21,560 Speaker 1: investment grades. Definitely a high yield or a junk bond. Right. Uh, 45 00:02:21,880 --> 00:02:25,720 Speaker 1: these what the order book was like three times more 46 00:02:25,720 --> 00:02:28,520 Speaker 1: three times as big as the actual offering. So obviously 47 00:02:28,600 --> 00:02:31,880 Speaker 1: a lot of demand. Is it a pretty safe risky 48 00:02:31,919 --> 00:02:35,720 Speaker 1: bet because well, oil prices created now they've stabilized, you 49 00:02:35,720 --> 00:02:38,040 Speaker 1: could say, around or just under fifty bucks of barrel, 50 00:02:38,120 --> 00:02:41,000 Speaker 1: So people are saying it's it's it's the it's the 51 00:02:41,120 --> 00:02:45,239 Speaker 1: risk return is good here. Yes, So from what I 52 00:02:45,360 --> 00:02:47,200 Speaker 1: understand from the people that I talked to, they tell 53 00:02:47,240 --> 00:02:49,240 Speaker 1: me that, um, if you're going to go and invest 54 00:02:49,240 --> 00:02:51,280 Speaker 1: in one of these names, you're doing so because you 55 00:02:51,320 --> 00:02:54,200 Speaker 1: think that this company will still be profitable at this 56 00:02:54,280 --> 00:02:57,200 Speaker 1: sort of forty to fifty band Um. We did see 57 00:02:57,240 --> 00:02:59,480 Speaker 1: some bankruptcies earlier this year, and some of the large 58 00:02:59,560 --> 00:03:02,800 Speaker 1: names like Energy twenty one or lend Energy. UM, but 59 00:03:02,880 --> 00:03:05,360 Speaker 1: those are companies that maybe needed support closer to eighty 60 00:03:05,440 --> 00:03:09,120 Speaker 1: or a hundred dollars. Is there any chance that people 61 00:03:09,160 --> 00:03:12,639 Speaker 1: are going to get stung by buying these high yielding 62 00:03:12,840 --> 00:03:16,760 Speaker 1: debt instruments. You never know, especially in the case of oil. 63 00:03:16,840 --> 00:03:20,359 Speaker 1: Earlier this year, UM high yield bonds in general were 64 00:03:20,400 --> 00:03:23,480 Speaker 1: really heavily correlated with the price of oil, so as 65 00:03:23,520 --> 00:03:27,080 Speaker 1: it dropped, UM spreads on high yield bonds widened. And 66 00:03:27,280 --> 00:03:31,160 Speaker 1: while that sort of correlation is decoupled some since February, 67 00:03:31,200 --> 00:03:33,560 Speaker 1: a lot of people are wondering could this come back, 68 00:03:33,680 --> 00:03:37,120 Speaker 1: And if oil keeps falling, that does raise questions about 69 00:03:37,120 --> 00:03:40,000 Speaker 1: whether spuds are widen and some investors might get stung. 70 00:03:40,920 --> 00:03:42,640 Speaker 1: I want to thank you very much for spending time 71 00:03:42,640 --> 00:03:46,400 Speaker 1: with us. Claire Boston is a corporate finance reporter for 72 00:03:46,520 --> 00:03:50,600 Speaker 1: Bloomberg News, and her story is Junk bond buyers keep 73 00:03:50,680 --> 00:03:54,760 Speaker 1: hunting for yield amid a global market spasm.