The Credit Boom Just Won't Die

Perhaps Wall Street analysts spoke too soon when they predicted 2017 would mark the slowdown of an unprecedented boom in corporate credit.

Last month, bankers and investors told Bloomberg's Claire Boston that they expected U.S. investment-grade bond sales to finally slow after six consecutive years of unprecedented issuance. But the exact opposite seems to be happening, at least if the first few days of 2017 are any guide. The debt sales are accelerating, with the biggest volumes of issuance ever for the first week of January, according to data compiled by Bloomberg.

And investors are showing as much appetite for the bonds as ever. They poured $2.3 billion into U.S. investment-grade bond funds over the past week, the biggest flow since early October, according to Wells Fargo Securities.

This may just be a blip leading to a gradual slowdown in sales, but there are several reasons 2017 may be another banner year for investment-grade sales:

1) Money has been cheap for years, with the Federal Reserve holding benchmark overnight rates at zero. But that time appears to be ending, for real this time because wages are increasing and inflation is returning. The Fed is planning to raise rates several times this year, and 10-year Treasury yields have been generally rising. So companies may want to lock in the low rates while they can.