Investors find safe haven in corporate bond market

Companies worldwide are selling bonds at the second-fastest pace on record with investors seeing the debt as an alternative to traditional havens such as government securities that are now paying negative yields.

Anheuser-Busch InBev, the world's biggest brewer, and Mexico City-based America Movil led sales last week of at least $65.8 billion, bringing this year's total to $2.08 trillion, according to data compiled by Bloomberg. That's second only to the $2.37 trillion issued at this point in 2009.

Investors are seeking corporate bonds with investment-grade yields that average a record-low 3.13 percent, or 2.13 percentage points more than government securities, and balance sheets that hold near record amounts of cash, according to Bank of America Merrill Lynch. At the same time, stocks and commodities are losing money as Europe's debt turmoil spreads and the global economy falters.

"For an increasing number of investors, corporate bonds are serving as de facto substitutes for Treasury securities, but with higher yields," Edward Marrinan, strategist at Royal Bank of Scotland Plc.

Company bond offerings are exceeding the pace set in the same period of 2011 by $2.4 billion, Bloomberg data show. Sales slumped in April after a record first quarter amid Europe's deepening debt strains and signs of a U.S. economic slowdown.

Corporate debt has returned 6.45 percent this year, already exceeding the 5.16 percent in 2011, according to the Bank of America Merrill Lynch Global Broad Market Corporate index. That compares with a 3.63 percent return, including reinvested dividends, on the MSCI All-Country World Index of stocks.

The U.S. two-year interest-rate swap spread, a measure of debt market stress, fell 1.13 basis points to 22.5 basis points, the lowest since Aug. 1, 2011. The gauge narrows when investors favor assets such as corporate bonds and widens when they seek the perceived safety of government securities.

Meanwhile, the seasonally adjusted amount of U.S. commercial paper rose $9.4 billion to $981.9 billion outstanding in the week ended July 11 after plunging by the most in 19 months in the prior period, the Federal Reserve said. Short-term IOUs from nonfinancial companies jumped $14.5 billion to $191.3 billion outstanding, the biggest rise since a $15.9 billion increase for the period ended Jan. 11.