Uncle Sam Gave Bonds a Leg Up
Credit markets had a stellar year in 2009, with records shattered in asset-class returns and debt issuance, even as the economic background remained largely dismal. From mortgages to junk-rated corporate debt, there wasn't a sector where investors could go wrong, and broad indexes posted their best returns in more than a decade.
The key was government support. The U.S. government made clear to nervous investors the financial system and the credit markets were going to lead the broader economy out of recession, and put up trillions of dollars to that end. The investors who did well took note of that message.
A renewed faith in the solidity of the financial system and ultralow interest rates on risk-free Treasury debt sent investors piling into corporate debt in record numbers in 2009, despite the backdrop of a dismal economy. Unemployment topped 10% for the first time in decades and consumer confidence posted its worst year in more than 20 years.
Issuance soared as companies raised $1.06 trillion in U.S. dollar-denominated investment-grade bonds and another $147.7 billion in speculative-grade debt, both records according to Dealogic.
Returns were impressive. The investment-grade benchmark index, Barclays's Capital U.S. Credit Index, was up 16.19% for the year to Dec. 30, the best annual return since 1995. Merrill Lynch's benchmark High-Yield Master II junk index turned in a 57.4% return, a record.
http://online.wsj.com/article/SB10001424052748704162104574630431028034894.html
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