Investors Use Derivatives to Navigate US Corporate Bonds

Investors in the U.S. corporate bond market are experiencing substantial returns from interest and principal payments. This influx of capital is being reinvested at a pace so rapid that it is generating demand which corporate issuers are finding difficult to meet. Data compiled by Bloomberg indicates that blue-chip companies issued over $1 trillion in bonds through August of this year. Despite this considerable issuance volume, analysis from BNP Paribas suggests that money managers received an even larger amount from their existing bond investments during the same period. This market dynamic highlights that the majority of this capital is being redeployed into corporate bonds. Consequently, the rate at which investors generate and reinvest capital is currently exceeding the supply of new debt offerings from corporations.