Daily Brief: Companies Are Selling Billions Of Dollars' Worth Of Bonds... While They Still Can

Daily Brief: Companies Are Selling Billions Of Dollars' Worth Of Bonds... While They Still Can

about 2 years ago3 mins

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Data out on Tuesday showed companies sold over $100 billion worth of bonds last week – before they have to resort to more desperate fundraising measures…

What does this mean?

The first week of the year’s always a busy time for the bond market, but this one’s been busier than most – not least because companies are scrambling to raise money before interest rate hikes push up the cost of borrowing. In fact, companies have raised over $100 billion selling bonds in what’s become the second-biggest start to a year ever. Investors aren’t just sniffing around low-risk debt either: pandemic-battered cruise operator Royal Caribbean raised $1 billion last week, and AMC Entertainment – which had a brush with bankruptcy in the height of the pandemic – is reportedly thinking about getting in on the action too.

Bond issuance

Why should I care?

The bigger picture: Time is of the essence.

Companies are right to get a move on, with news emerging last week that the Federal Reserve is thinking about upping interest rates sooner than expected. And since traders are betting that there could be as many as eight rate hikes by early 2024, selling debt might get very expensive very quickly. Investors are okay with it: they’ve already started withdrawing their orders for new bonds, in hopes it’ll only be a couple of months before they can buy into them at higher yields.

Borrowing costs

Zooming out: The backup plan.

It stands to reason, then, that companies aren’t just relying on debt to raise cash, but venture capital (VC) too. Just look at Getir: the Turkish grocery delivery company is reportedly looking for more than $1 billion in investment from VC firms, in a move that would see the company valued at $12 billion. That’s an ambitious goal, but they might be knocking at the right door: American VC funds raised a record amount of cash last year.

Keep reading for our next story...

China's Hybrid And Electric Vehicle Sales Shot Up Last Year

China autos image

Data out on Tuesday showed China sold almost three times more hybrid and fully electric vehicles (EVs) last year than in 2020. That’ll show the gas-guzzlers who’s boss.

What does this mean?

Chinese car sales had a remarkably strong year, with the country’s drivers buying 21 million vehicles in 2021– almost 5% more than the year before and only 5% less than a pandemic-free 2019. But it was hybrids and EVs that stole the show: customers bought almost three times as many of these “new energy vehicles” as they did in 2020.

China new energy sales
Source: The Wall Street Journal, China Passenger Car Association

And things might only be about to get greener: the Chinese government has said it’ll stop offering subsidies for EV purchases from 2023, meaning the country’s drivers are likely to take advantage while they still can. That could be why the China Passenger Car Association is expecting Chinese EV sales to hit 6 million this year – almost twice as many as 2021. And if it’s right, new energy vehicles will represent around 20% of the country’s total car sales.

Why should I care?

The bigger picture: A showcase in doing things right.

Volkswagen still somehow managed to fumble the ball: the carmaker said on Tuesday that it sold 14% fewer cars in China last year, mostly because the chip shortage caused all sorts of production issues. No such problems for Tesla: the EV maker – whose close relationships with suppliers helped it come through the chip shortage relatively unscathed – saw car sales in the country more than double in 2021.

Zooming out: Airbus is grounded.

EV companies might be thriving, but China isn’t fertile ground for everyone: Airbus warned on Tuesday that the country’s hardline anti-Omicron tactics could cause the planemaker a major headache. After all, the company could be forced to close one of its key factories in the country, while its Chinese customers might not want to add any planes to their runways until they know their customers are here to stay.

Omicron China aviation
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