FOMO is Gripping Credit Markets, Making Bond Premiums Vanish

It's been some time since the debt market favors the bond issuer side. For most of 2022, bond issuers have been showering bond investors with extra yield in order to ensure they meet their issuance target. In 2023, in some corners of credit markets, companies are starting to see money being thrown around in ways that feel very similar to the easy-money days.

When companies issue debt, they usually add a few basis points on top of what you'd normally expect to pay. Those concessions will average 13 basis points in 2022, according to Smith. Oracle received $5.2 billion at an average concession of -11 basis points, implying that investors effectively gave up some of the yield they could have received by purchasing Oracle's debt on the secondary market.

Last week, companies issued more than $18 billion in US dollar-denominated bonds at an average concession of -1 basis point. That was on the back of orders that were five times the offering size, meaning that investors basically forfeited their new issue premiums in order to get a piece of the deal.

The financial conditions has seen the fastest easing since global policy makers engineered a market turnaround with historic stimulus to combat the 2020 Covid turmoil.

All of this points to the FOMO gripping markets now as fixed-income money managers, buoyed by signs that interest rates have peaked, rush to snap up yields that are starting to disappear again, said Bloomberg’sBailey Lipschultz.