Short-term debt volumes posted the biggest monthly jump in almost four years in January, signaling a pick up in corporate bond issuance may be down the road. Commercial and industrial loans plus commercial paper grew by over $41 billion in January, way up from the second half of 2004's average of $15.1 billion per month. Short-term borrowing spikes generally precede an increase in term debt sales.
John Lonski, chief economist at Moody's Investors Service, said net corporate borrowing appears to be on the rise and market watchers may have to upwardly revise issuance projections. "Companies early on finance acquisitions and capital spending in the short-term markets, which could lead to an upturn in corporate bond issuance," said Lonksi. Furthermore, Lonski noted with the 10-year Treasury yielding less than 4% as of Feb. 9 and corporate yields at record lows, companies might be further inspired to rush out to satisfy their funding needs in the bond market if they are expanding.
