Once ‘Toxic,’ Floating-Rate Company Bonds Find Buyers Again
- Inverted yield curve makes short-duration debt more attractive
- Invesco, American Century are looking at the securities
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With bond yields having plunged over the last month, money managers from Invesco to American Century are making a surprising move: they’re buying more floating-rate corporate debt.
They’re profiting from an unusual twist in the bond markets known as an inverted yield curve, where floating-rate notes can now pay bigger coupons than bonds maturing in five years because short-term rates are higher than longer-term yields. Banks and other financial companies are tapping into that demand by selling more floaters, with issuance topping $15 billion last month, more than seven times April’s level, according to data compiled by Bloomberg.