The European Central Bank's corporate-bond purchases have buoyed highly rated corporate bonds during the sell-off precipitated by Britain's vote to leave the EU. Average yields on investment-grade corporate bonds hit 0.9285% on Wednesday, their lowest point since Bank of America Merrill Lynch began to record data in 1998.
Negative interest rates have pushed 23% of bonds in the global fixed-income market to negative yields, a significant increase from the start of the year, say analysts at Bank of America Merrill Lynch. Investors are expected to be driven to riskier assets as the supply of investment-grade bonds tightens when the European Central Bank begins its corporate-bond purchasing.
Corporate-bond issues continue to flood the market with offers, giving investors an opportunity to capitalize on low borrowing costs. Bond volumes jumped Monday as high-yield bonds recorded their largest quarter on record. "A lot of opportunistic issuers [have been] stepping in to take advantage of market conditions," said Maureen O'Connor of Bank of America Merrill Lynch.