The great U.S. corporate bond issuance

Singularly, you may not have noticed various U.S. companies either re-finance existing debt or importantly issue new debt, over the past year or so.
Collectively, it is a monumental amount of debt.

Cleverly, these companies have taken advantage of the almost perpetual low yields of the government benchmarks, upon which they can base their spreads against.

Companies such as Oracle, Amazon & Goldman Sachs have issued bonds either secured or unsecured against their equity at historically low yields; which is brilliant financial strategy for these companies.

With interest rates at such low levels, probability and cycles suggest that rates will rise in the coming 6 years or so.

When 10 year benchmark rates are 6% and not 2%, I can’t see a 10 year 2.5% coupon Oracle Corp. bond being redeemed early, meaning bond holders will probably suffer capital losses unless held until maturity. Just imagine holding a bond that yields 2.5% into the latter half of this decade while others are earning twice or three times that amount?

Although, we are seeing a great bond issuance cycle, capital markets will most likely miss out on the next re-financing cycle.

What happens then?

Perhaps, companies will payout maturing debt by selling their own shares, which incidentally, they accumulated in share buy-backs conducted in 2012/2013 using the cheap money that they obtained from the same investors who bought their bonds?