Junk Bond Rally Shaping Up to Make June Busiest Month on Record

(Bloomberg) -- Companies rushing to shore up cash during the Covid-19 pandemic are fueling the busiest June ever in the U.S. junk-bond market.

Through Friday, companies have raised about $45.5 billion this month. That puts it on pace to be the busiest month since $46.4 billion was sold in September 2013, the former record since 2006, according to data compiled by Bloomberg.

Companies are looking to raise money now since they don’t know how long this window of opportunity will last, especially if a second wave of coronavirus cases hits later in the year. Bankers have been encouraging their clients to raise money now in case things get worse.

The Federal Reserve’s promise to buy a limited number of junk bonds to support market liquidity has led to a buying frenzy as investors interpreted their action to mean the asset class is safer than usual.

“In just three months, the high-yield market has evolved from a truly broken state, to opening for secured rescue financing packages, to allowing companies to refinance debt at opportunistic and unprecedented rates, aided by our helicopter parents at the Federal Reserve,” said Christian Hoffmann, a portfolio manager at Thornburg Investment Management in Santa Fe, New Mexico.

Meanwhile, funding costs have fallen, ​allowing companies to add cash to their balance sheets and refinance near-term debt to push out the maturities.

Investors have continued to pour billions into the asset class, though the pace has slowed in recent weeks.

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