The largest corporate debt issuance of all time happened this week, with $69 billion trading hands. The debt represents companies offering investors high-grade bonds with later maturities to increase liquidity — and might even help boost Bitcoin.
The $69 billion figure falls just short of the record of $76.2 billion from September of last year. The sales at that time were charged largely by the impending Federal Reserve movement to reduce interest rates.
Companies generally issue bond debt when the market is strong, and liquidity is difficult. By issuing bonds, the bank is generally able to lock in a rate that is substantially lower than the bank rate.
The potential for lower bank rates, or the potential of market decline, can drive companies to make such offerings at the same time. This drives large waves in corporate issuance.
A Lower Year
What’s more, the rating of these instruments can affect how much is sold. When companies are downgraded, sales can be much more difficult. This could keep sales lower than last year.
Other factors could reduce the total sales for the year as well. For example, most issuances take place because of mergers and acquisitions. The increased political unrest has made this market dryer than in previous years and may keep offerings low.
Finally, the funds are sometimes used to pay dividends or issue stock. With anxiety about where the market is moving, this may come to an end. Companies often loathe offering such things based on debt, since it increases their leverage.
Bitcoin Stability Shines
Of course, the news raises speculation about where the market is headed. If companies see larger than average issuances, it could indicate that the market may well expect rate decreases.
With lower rates, the market may well be entering a significant decline. This would decrease the appetite for higher-risk investments, and drive funds into other less-risky markets.
If Bitcoin is seen as purely speculative, such a movement could well send prices down. However, if Bitcoin can function well as a hedge investment against market loss, prices may rise. Investors moving out of the high-risk equity market could even bring more funds into Bitcoin.