Bonds give recession signals | Fox Business

Companies with top credit ratings have returned to the bond market to shore up their cash flow as they fret over the continued inflation and recession. That gives investors the opportunity to buy the safest bonds at higher rates because of rising interest rates.

Warren Buffett’s Berkshire Hathaway announced an offer of 115 billion yen ($842 million) this month while Duke Energy is out with a $1 billion offer. Amazon sold $8.25 billion of bonds in November.

“The stock market in general is starting to behave in a cyclical way,” market expert Adam Kobeissi told FOX Business. “For the first time in an entire year, we are seeing higher prices while stocks are falling, and this comes just one month after the technology shutdown began.”

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The author of the Kobeissi book, a weekly report on the world’s capital markets, said that technology companies have already laid off more than 20,000 workers, more than the total during the entire period of the dot-com bubble.

“At the moment, it’s almost out of control and it’s definitely an indication of a negative outlook on the market and the economy in general for 2023,” said Mina Tadrus, CEO of Tadrus Capital, It is a high income and stable mutual fund. return of 2.5% per month.

He told FOX Business that when one company starts to lay off, it is easy for others to follow. “It’s almost universally accepted and everyone understands that.”

Kobeissi expects organizations to feel the pain in the middle of 2023 to a lesser extent.

“As interest rates continue to rise and consumers struggle on the spending front, we expect more easing and possibly more bond issuance to help organizations build a protection while the economy is failing,” he said.

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Adam Soloff of Soloff Wealth Management said the rise in interest rates has given his firm the opportunity to add senior bonds to some investors because the rates are high enough to get them. useful income.

“Due to the increase in yields, especially for people who prioritize security and income, we have allocated a large part of our savings to investment company bonds, as well as government bonds that are tax-free for those who are on higher taxes,” Soloff told FOX. Business.

The move by top companies into the investment market is expected to continue, regardless of the economic situation or what the Federal Reserve does with interest rates. Most companies have bonds that mature in the near future. Others may look to refinance before the Fed completes its interest rate hike cycle.

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Top companies began piling into the debt market in August when Apple, Intel and Facebook parent Meta Platforms all issued bonds—$5.5 billion for Apple, $6 billion for Intel and $10 billion for Meta. which took credit for the first. time

A few months later, they all announced layoffs or hiring freezes. Intel laid off thousands of workers in October, Bloomberg reported. Apple announced a hiring freeze in November for most jobs outside of research and development, Bloomberg said. Meta reduced its workforce by 13%, or 11,000 workers.

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Amazon, which sold bonds last month, is considering cutting as many as 20,000 jobs.

Data compiled by Fitch Ratings show US companies issued five times more non-performing loan ratings than to October than “junk” bonds: $439 billion and $79 billion of senior debt.

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