“This is about our continued confidence in the long-term growth outlook for our business and is simply the continuation of our capital allocation strategy in these favorable debt markets,” Billy Brennan, a spokesman for St. Louis-based Monsanto, said in an e-mailed statement.
The longest-maturity debt sold this week, $500 million of 3.95 percent bonds due in 2045, declined to 98.9 on Thursday, according to Trace, the Financial Industry Regulatory Authority’s bond-price reporting system.
“It’s an awful time to be an investment-grade bondholder,” David Sherman, founder of New York-based Cohanzick Management LLC, which manages $1.6 billion, said in a telephone interview.
Cohanzick started a new fund last year focusing on selling short investment-grade bonds and buying stock to reap the rewards of share buybacks. Among companies Cohanzick has targeted is Gap Inc., where new chief executive Art Peck unveiled a $1 billion share buyback less than a month after taking the helm of the struggling retailer in February. Sherman expects the company to issue debt to fund the buybacks. Liz Nunan, a spokeswoman for Gap in San Francisco, declined to comment.
Few Alternatives
Despite lower returns and deteriorating credit quality, many bondholders have been gobbling up the debt because of a lack of alternative investment options.
“Credit as a whole looks more compelling than other asset classes right now,” Antczak said. “The risks here are longer- term.”
Many fund managers feel they have little choice but to keep buying bonds as central banks globally flood their financial systems with cash, pushing investors into riskier assets.
“Central banks have pushed investors out the risk spectrum, to the benefit of companies,” said Scott Carmack, a money manager at Portland, Oregon-based Leader Capital Corp., which oversees $1.5 billion in fixed-income assets. “Investors take what is given to them, it’s shoved down their throat and they smile and take it because there is nowhere else to get yield.”