Corporate borrowers have it good; consumers, not so much

Barron's reports:

IT'S THE BEST OF TIMES FOR CORPORATE borrowers, while it's just the opposite for consumers, who continue to shed debt at a record rate.

Investment-grade U.S. corporations brought a huge $45 billion slate of new bond issues last week, according to Thomson Reuters, as borrowers were getting money while the getting was good. Strong investor demand cut the spread, or the risk premium, of Baa-rated corporates over Treasuries to a two-year low, notes Strategas Research Partners.

Corporations also might have wanted to get their deals done ahead of this week's torrent of new coupon issues from the Treasury totaling some $84 billion, including $40 billion of three-year notes, $21 billion in 10-year notes, $13 billion of 30-year bonds plus $10 billion in 10-year inflation-protected securities.

That unending parade of borrowing had Pimco's Bill Gross declaring last week that the world's biggest bond-fund manager would be paring holdings of securities of both the U.S. and U.K. governments out of concern about their massive budget deficits. And Pimco says it plans to add to holdings of German bonds, as that government's budget is on a path to return to eventual balance.