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US junk bonds set another sales record with busiest September ever

[NEW YORK] The US junk-bond market racked up another monthly record after borrowers sold more than US$47 billion of the risky debt in September to borrow at some of the cheapest rates ever.

The crush of sales, that helped push issuance to an annual record the same month, made it the busiest September on record and the third-biggest month of all time, according to data compiled by Bloomberg. The surge was mostly driven by refinancings that are expected to continue into October.

Issuers have pulled forward deals to get ahead of the uncertainty around the November presidential election and a possible second wave of Covid-19. Four of the top ten months have occurred this year, the data show, as companies reap the benefits of the Federal Reserve's liquidity-boosting policies and investors grasp for yield.

The flood of deals came as junk bonds posted the first monthly loss since March at just over 1 per cent. High-yield debt rallied significantly after the Fed intervened in April, and has only returned 0.6 per cent so far this year, compared with 6.6 per cent for investment-grade bonds. But the asset class still beat the S&P 500 which had negative returns of 3.8 per cent in September.

Spreads widened 40 basis points (bps), the most in six months, to 517bps more than Treasuries, the data show. The riskiest debt in the CCC tier returned 0.48 per cent, and has now outperformed the broader high-yield index for five consecutive months while also decoupling from the energy index which lost 4.22 per cent.

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