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MarketScreener Homepage  >  Equities  >  Nyse  >  The Home Depot, Inc.    HD

THE HOME DEPOT, INC.

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Credit Markets: Corporate Bonds Gain a Broader Appeal -- WSJ

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03/31/2020 | 02:47am EDT

Companies issue debt for a cushion in crisis, and begin attracting more stock investors

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, head of 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 $73 billion last week, roughly 21% 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.

"We generally look at high yield but we've played in some of these deals, " said David Norris, head of U.S. credit for London-based TwentyFour Asset Management. Disruptions in the commercial paper market have been forcing blue-chip companies to borrow at unusually high yields although pricing has started to normalize in recent days, presenting fewer options for bargain hunters, he said.

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 4.2 cents on the dollar to 121.65, 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 declined to 0.667% from 0.744% Friday, according to data from Tradeweb.

The U.S. dollar rose slightly, 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 0.48% to 93.62 Monday, stabilizing after suffering a 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 0.46% 44.15 End-of-day quote.13.64%
DJ INDUSTRIAL -0.58% 25400.64 Delayed Quote.-10.48%
NASDAQ 100 -0.27% 9416.713051 Delayed Quote.8.12%
NASDAQ COMP. -0.46% 9368.988915 Delayed Quote.4.90%
NIKE, INC. -1.41% 98.46 Delayed Quote.-2.81%
ORACLE CORPORATION 0.79% 53.62 Delayed Quote.0.42%
S&P 500 -0.21% 3029.73 Delayed Quote.-6.22%
SYSCO CORPORATION -1.76% 55.95 Delayed Quote.-34.59%
THE HOME DEPOT, INC. -0.90% 245.14 Delayed Quote.12.25%
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Financials (USD)
Sales 2021 115 B - -
Net income 2021 10 582 M - -
Net Debt 2021 28 922 M - -
P/E ratio 2021 24,8x
Yield 2021 2,44%
Capitalization 263 B 263 B -
EV / Sales 2020
EV / Sales 2021 2,54x
Nbr of Employees 400 000
Free-Float 60,0%
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Technical analysis trends THE HOME DEPOT, INC.
Short TermMid-TermLong Term
TrendsBullishBullishNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 34
Average target price 250,38 $
Last Close Price 245,14 $
Spread / Highest target 12,2%
Spread / Average Target 2,14%
Spread / Lowest Target -24,9%
EPS Revisions
Managers
NameTitle
Craig A. Menear Chairman, President & Chief Executive Officer
Richard McPhail Chief Financial Officer & Executive Vice President
Matthew A. Carey Chief Information Officer & Executive VP
Paul Antony Senior Vice President-Technology
Fahim Siddiqui Senior Vice President-Information Technology
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