Bond Hunger Seen as `Insatiable' in U.S., Sustaining Rally

  • MassMutual’s Noreen says it’s a ‘great time’ to issue debt
  • Break in stock market could signal end of bond rally, he says

Higher interest rates in the U.S. have lured foreign buyers to the corporate-bond market, boosting demand, according to Cliff Noreen, who helps oversee more than $160 billion at Massachusetts Mutual Life Insurance Co.

“There’s insatiable demand,” Noreen, who is deputy chief investment officer at the insurer, said Thursday in an interview on Bloomberg Radio. “Our yields are higher than they are in Europe, higher than they are in Japan, so our bond market looks pretty attractive.”

Buyers snapping up investment-grade corporate bonds in the U.S. have pushed the extra yield investors demand over Treasuries to the lowest levels since 2014, according to Bloomberg Barclays index data. A lack of defaults and strong corporate profits helped boost the attractiveness of those assets, Noreen said.

Lower rates have made it an “issuer’s market,” Noreen said. Investment-grade companies have sold more than $867 billion of bonds in 2017, on pace for the busiest year on record, according to data compiled by Bloomberg. AT&T Inc. is planning to sell $22.5 billion of debt in a multi-tranche offering, the biggest debt-market deal of the year, according to a person with knowledge of the matter who asked not to be named because the deal is private.

“If you’re a company or a corporation and you want to issue debt, now’s the time to do it,” he said. “You’re going to get very low interest rates, very low spread over the Treasury rate, so it’s a great time to do it.”

Stock markets have also rallied, with the S&P 500 Index gaining about 10 percent this year.

“Corporate spreads are very tight, the fundamentals are strong -- the question is how long will this continue?” he said. “When we see a break in the stock market, we’ll probably see a break in corporate bonds,” Noreen said, adding that it would likely appear in the high-yield market first.

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