A handful of U.S. investment-grade companies initially lined up to issue corporate bonds on Monday opted instead to sit out the rocky patch, experts said.
That was the message Monday from the largest part of the roughly $10.6 trillion U.S. corporate bond market, a colossus of Wall Street that idled as investors around the world watched for potential spillover from the debt woes of China’s second-largest property developer.
Concerns have ratcheted higher that Chinese property developer Evergrande 3333, -10.24% might lose its grip on more than $300 billion of debt, causing ripples throughout the cooling Asian economy and potentially beyond to global financial markets.The Dow Jones Industrial Average DJIA, -1.78% booked a 1.8% drop Monday, its worst day in nine weeks, but the blue-chip index also finished well above its more-than-900-point plunge at the session’s low. The S&P 500 index SPX, -1.70% fell 1.
What happens next? “Is Evergrande going to restructure? Most likely: Yes,” said John McClain, a Brandywine Global portfolio manager for high yield and corporate credit strategies, in a phone interview. That doesn’t necessarily mean the U.S. corporate debt markets have been insulated from any spillover threat, particularly with spreads near record lows. Spreads are the level bond investors are paid above risk-free benchmarks, like Treasurys, to offset default risks.
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