Record Low Interest Rates Create Stampede to Issue Corporate Bonds

With interest rates at or near historic lows, companies have been issuing corporate bonds at a breathtaking pace, setting a weekly record this month. Excluding financial services companies, corporate borrowing for the week ending May 20 reached $29.7 billion, which beat the previous weekly record of $29.04 billion set last September. Those rushing to add corporate debt this year include some companies already flush with cash, such as Google Inc. (Nasdaq: GOOG ), Microsoft Corp. (Nasdaq: MSFT ), and Johnson & Johnson (NYSE: JNJ ). With the U.S. Federal Reserve buying up government debt, yields on such benchmarks as the 10-year Treasury note fell from 3.725% in early February to 3.118% in mid-May. Corporate bonds are priced against Treasuries, so when yields fall on government bonds it makes corporate borrowing cheaper. The unusually low interest rates make acquiring debt very attractive even for companies with no immediate need for the money.