In the wake of Donald Trump’s recent election victory, companies are rushing to tap into the US bond market, taking advantage of favorable conditions. Firms such as Caterpillar Inc. CAT, Gilead Sciences Inc. GILD, and Goldman Sachs Group Inc. GS have collectively raised over $50 billion in the past week.
What Happened: The surge in corporate borrowing is driven by a rally in credit and equity markets, which has pushed borrowing costs to historic lows. Investors are optimistic about potential tax cuts boosting profits, leading to a decrease in corporate borrowing costs relative to U.S. Treasuries, reported The Financial Times on Friday. The U.S. investment-grade bond spreads were at 0.8 percentage points late Thursday, nearing their lowest since 1998.
Banks have been quick to capitalize on these conditions, with significant activity in the financial sector.
Why It Matters: The bond market has been experiencing heightened volatility, as evidenced by the MOVE index reaching its highest level in over a year ahead of the U.S. election.
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Following Trump’s election, bond yields have continued to rise, complicating the Federal Reserve’s efforts to ease borrowing costs. The 10-year Treasury yield reached 4.34%, influenced by speculation surrounding Trump’s fiscal agenda.
Trump’s reelection has had a profound impact on financial markets, with the S&P 500 Index reaching new all-time highs since the election. This contrasts the volatility experienced by the emerging market stocks dropping to levels last seen in mid-September.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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