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MarketScreener Homepage  >  Equities  >  Nyse  >  Oracle Corporation    ORCL

ORACLE CORPORATION

(ORCL)
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Stock Investors Buy Into Corporate Bond Surge

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03/30/2020 | 12:46pm EDT

By Matt Wirz

Companies ranging from Oracle Corp. to Nike Inc. are borrowing record amounts in the investment-grade bond market to build cash before the full impact of the novel coronavirus hits the U.S. economy. Much of the new debt is being purchased by an unusual type of buyer: stock investors.

"There is a rotation from a number of nontraditional investors out of other asset classes like high yield, distressed debt and equities into investment grade," said Andrew Karp, co-head of U.S. investment-grade capital markets at Bank of America Corp. "Among other reasons, it's a place to hide from volatility."

Issuance of investment-grade bonds in the U.S. hit about $65.5 billion last week, roughly 10% higher than the previous high-water mark reached in 2013, according to data from Dealogic.

Retail-oriented giants like Nike and Home Depot Inc. were among the biggest initial borrowers -- issuing $6 billion and $5 billion, respectively -- but the pace of new deals remains high, with names like technology company Oracle and food-services provider Sysco Corp. joining the fray Monday.

Nontraditional buyers are accounting for as much as one-quarter of the orders for the new investment-grade bonds Bank of America is selling, Mr. Karp said. The bank arranged Nike's deal, among others.

Investment-grade bond prices fell sharply in March as some fund managers sold out to meet client redemptions, pushing yields up and making the debt more attractive to buyers like hedge funds that normally focus on stocks. Many investors became more willing to buy the bonds after the U.S. Federal Reserve announced its own plans to start purchasing highly rated corporate debt to bolster the market. Bond yields rise when prices fall.

The yield of a Bloomberg Barclays index of U.S. investment-grade corporate bonds was about 3.7% on Friday, down from its recent peak of 4.58% on March 20, but still well above its level of 2.43% at the end of February, according to data from FactSet. The index declined about 8.5% in March through Friday, a relatively steep decline compared with a 15% fall in the much riskier stocks of the S&P 500.

Foreign fund managers are also stepping into U.S. corporate bonds because their hedging cost in dollars has declined even as investment-grade bond yields have jumped. Bonds issued by banks were among the biggest gainers Monday, with Wells Fargo & Co.'s bond due 2051 jumping about 4.5 cents on the dollar to 122, according to data from MarketAxess.

U.S. Government bond yields fell Monday morning despite gains in stocks, showing that investors remain concerned about the virus's long-term economic impact. The 10-year Treasury yield was around 0.624%, down from 0.744% Friday, according to data from Tradeweb.

The U.S. dollar rose, in contrast to the U.K. pound and South African rand, after both countries were hit by sovereign credit-rating downgrades. The WSJ Dollar index, which measures the U.S. currency against a basket of 16 foreign currencies was up 0.6% to 93.73 Monday, rebounding slightly from its roughly 4% loss in the previous four trading days.

Write to Matt Wirz at matthieu.wirz@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
BYD COMPANY LIMITED -4.35% 42.9 End-of-day quote.10.42%
DJ INDUSTRIAL -0.04% 24465.16 Delayed Quote.-14.24%
NASDAQ 100 0.38% 9413.988451 Delayed Quote.7.80%
NASDAQ COMP. 0.43% 9324.587279 Delayed Quote.3.92%
NIKE, INC. -0.54% 93.75 Delayed Quote.-7.46%
ORACLE CORPORATION 0.77% 52.62 Delayed Quote.-1.43%
S&P 500 0.24% 2955.45 Delayed Quote.-8.52%
SYSCO CORPORATION -1.39% 51.75 Delayed Quote.-39.50%
THE HOME DEPOT, INC. 0.42% 241.88 Delayed Quote.10.76%
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Financials (USD)
Sales 2020 39 541 M
EBIT 2020 17 335 M
Net income 2020 10 256 M
Debt 2020 26 446 M
Yield 2020 1,76%
P/E ratio 2020 16,8x
P/E ratio 2021 15,5x
EV / Sales2020 4,87x
EV / Sales2021 4,83x
Capitalization 166 B
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Mean consensus HOLD
Number of Analysts 34
Average target price 51,68 $
Last Close Price 52,62 $
Spread / Highest target 14,0%
Spread / Average Target -1,79%
Spread / Lowest Target -43,0%
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Managers
NameTitle
Safra Ada Catz Chief Executive Officer
Lawrence Joseph Ellison Chairman & Chief Technology Officer
Mark E. Sunday Chief Information Officer & Senior Vice President
Michael J. Boskin Independent Director
Jeffrey O. Henley Vice Chairman
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