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Richard Zogheb of Citigroup Americas Debt and Equity Capital Markets weighs in on corporate bond demand.
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Borrowing costs are -- historic lows so it may be no surprise that companies are stepping up the bond issuance.
In fact corporate bond sales nearing record highs in the month of September exceeding 100 billion dollars for only the third time since 1995.
What's behind this fund raising -- -- continuing what's the trade.
-- way is Richard is so -- managing director and co head of America's debt and equity capital markets at Citigroup Richard welcome TO.
Thank you can tell me about the trend which are taken this more about companies taking advantage of the cheap money -- investors desperate for a new idea but.
It's not a new idea certainly not that it's I think it's a combination of issuers taking advantage have.
Very low interest rate yields.
And looking at the election coming up in the fiscal cliff and -- I wanna move my funding up and take advantage of it now this went -- to take the risk of what's gonna go on the election in the fiscal cliff.
So really is a timing issue that people are snapping up investors are snapping up this corporate debt for fear of October perhaps you've got earning season fiscal -- to your point who knows what the next shoe to drop in Europe will be.
I think it's time for -- -- point of view from the investor point of view.
-- really they're flush with cash and I think it's a number of them are looking at the equity market feels a little overbought.
And saying where can I work -- meal Indian leverage side of that market the debt market you can deftly -- some yield.
I'm -- and in the investment grade -- -- not getting yield.
You can put a little safe product into your portfolio -- in the past may be bought some sovereign credits and things like that -- that was the safe party portfolio.
You don't wanna buy sovereigns to safety now so maybe investment grade corporates as it is your new safe instrument -- -- that's interesting look even more safe than just a traditional treasury.
Well maybe not so much US treasury but certainly safer than upper -- right many other -- European sovereigns Asian sovereigns as -- be there.
The -- portion of their portfolio mixed in with some US treasuries now they're saying -- -- -- US treasuries and maybe a -- to single -- in -- high triple B corporates and those are going to be very very -- -- US corporate index is up seven point 9% year to date vs the -- is up about 16%.
So tell you more about the trade in terms -- doing your homework right.
Forget you're trying -- all of these Visa investment grades and ratings in borrowing costs and all of these metrics and for average investors might be a little hard to -- This is the right now you know -- these.
Solid ties with small boats so there's not a lot a lot of -- -- going on I think people -- just -- liquid issues and trying to.
Stay invested I really think it's it's as I said it's almost like a -- push by some.
Look at hot single a rated companies and that's going to be very very safe -- -- a lot of yield.
But you're gonna it's gonna be very safe and you can buy any kind of intermediate bond fund that focuses on the high end quality there we can buy individual bonds.
And then if you really want to look for some yield.
-- to the leveraged markets that don't do so on an individual basis.
-- -- a well known mutual fund from from big index from big -- the Fidelity's the Franklin's in the world.
Because they liquidity dries up and -- markets and you don't wanna get caught as an individual investor OK good advice thank you so much richer set up a city thanks again you.
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