Ford's stock rose 3% following an upbeat earnings report, leading to increased buying of its outstanding bonds and tighter spreads over U.S. Treasurys. The company's fourth-quarter revenue exceeded estimates, and it announced a next-generation EV to compete with Tesla's "Model 2," along with a special dividend and plans for $2 billion in cost cuts. Ford's bonds have seen net buying and performed well, with spreads tightening by 16 to 39 basis points year-to-date, and by 5 to 10 basis points on Wednesday alone. The company's outstanding debt totals about $143 billion, with $92 billion in unsecured debt, and it returned to the investment-grade market last November.
Ford Motor Co.'s credit rating upgrade to investment grade has led to $46.8 billion of debt being removed from junk bond indexes, resulting in the largest monthly decline in the global benchmark of junk debt in 18 years. This upgrade signifies a shift in corporate priorities as companies strengthen their finances amid a potential recession. The decrease in fallen-angel bonds and the expectation of more rising-star upgrades indicate improving credit fundamentals, despite concerns about the economy. Analysts predict that $70 billion to $90 billion of debt will be upgraded to investment grade in 2024, while only $20 billion to $40 billion is expected to be downgraded to high-yield next year.
Almost 1,500 high-grade corporate bonds, including those issued by Apple, Microsoft, Google, Disney, and Comcast, are currently trading at a discount of 50 to 80 cents on the dollar. These bonds offer investors the opportunity to pursue handy returns, as they can be bought at a steep discount and will pay out at par when they mature. With interest rates rising, these discounted bonds have fallen in price, but their yields have moved above 5%. Smaller investors can take advantage of these discounted bonds by buying single-name bonds through brokers or adding them to their portfolios using mutual funds or ETFs.
Greek stocks have risen nearly 40% over the past year, with the Athens General Composite Index up almost 7% following the New Democracy party's 40.8% win in the national election. The party's business-friendly policies and successful macro policy implementation have attracted international investors, while reforms to Greece's antiquated bureaucratic systems and economic successes have reduced risk perception around Greek assets. The country's economic growth was 5.9% in 2022, well above the euro zone rate, and it is on the cusp of receiving an upgrade to investment grade. The next step will be the upgrade of the Athens Stock Exchange from Emerging to Developed.
Greece has achieved a significant milestone in its financial recovery as credit rating agency Fitch upgraded the country's credit rating to investment grade, marking its "greatest turnround". The upgrade is expected to attract more foreign investment and reduce borrowing costs for the country. Greece's economy has been on the rise in recent years, with the government implementing reforms and achieving a budget surplus in 2019.
Meta Platforms Inc. is set to raise $8.5 billion in a five-part bond sale, becoming the first mega-cap technology company to tap the US investment-grade bond market amid turmoil in the financial sector. The company plans to use the fresh funds to help finance capital expenditures, repurchase outstanding shares of its common stock, and for acquisitions or investments. Bank of America Corp., JPMorgan and Morgan Stanley are the bookrunners on Meta’s deal.
