Investors outside of the U.S. have been snapping up a near record amount of corporate bonds as the Federal Reserve gears up to cut interest rates for the first time in four years.
Net buying by foreign investors of U.S. corporate bonds, or “credit,” tumbled into negative territory during the pandemic, but it also reached a nearly record high of about $200 billion earlier this year, according to Torsten Slok, chief economist at Apollo Global Management.
Wall Street has been trying to convince investors clinging to cash earning roughly 5% in recent years to lock in bond yields before rate cuts occur.
At the same time, U.S. corporations issued a deluge of new debt to kick off September, largely avoiding the jitters seen in the stock market. Equities have whipsawed ahead of the Fed’s expected pivot to rate cuts at next week’s central bank meeting.
