High Yield bond issuance has benefited greatly from the near zero interest rate environment. The Federal Reserve has played an increasingly larger role in the capital markets since 2009 with its extreme low interest rate and expansionary monetary policies.
Q2’20 High Yield bond issuance of $125.4 billion was up 88% sequentially from $66.7 billion in Q1’20. Without the Fed’s backstop, how many High Yield issuers would have executed deals? For example, on April 8th 2020 Carnival Cruise Lines (tkr: CCL) issued $4.0 billion senior secured notes at 11.5% to mature 2023. That issuance will ultimately be rolled into new paper. It is reasonable to assume the CCL issuance and many others would not have occurred were the Federal Reserve not backstopping everything that moves.