Credit update January 28, 2013
It feels like a start to the “please your shareholder” year. The pendulum is definitely swinging to re-levering the balance sheets now that Uncle Sam seems to be panting from the effort of single-handedly levering up while consumers and companies were doing just the reverse. The new issue frenzy is still quite strong in both investment grade and high yield land. The amount of money that has come in to seek returns is substantial. We saw bank spreads do quite well last week; Sallie Mae’s new deal was well received by the market place. Utilities have been noticeably softer as shareholder –friendly actions come down the pipe; it is a well-known fact that this sector has enjoyed tremendous success from investors chasing defensive names with high dividend yields. Now that the Ute sector has run up so much from such favors, their management needs to apply new strategies to continue the love affair — what better way than to issue debt for buybacks or dividend increases?