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Companies with high credit ratings are returning to the bond market to shore up their cash reserves as they worry about persistent inflation and sluggish economic growth. It allows investors to buy the safest bonds with high yields due to rising interest rates.

Warren Buffett’s Berkshire Hathaway this month announced a 115 billion yen ($842 million) bond offering, while Duke Energy came out with a $1 billion offer. Amazon sold $8.25 billion worth of bonds in November.

“Bond markets in general have started to behave with a recession signal,” market expert Adam Kobesi told FOX Business. “For the first time all year, we’re seeing bond prices rise significantly while stocks fall, and that’s just a month after tech cuts began.”

“It’s almost damage control.”

Both Elon Musk and Mark Zuckerberg have fired thousands of employees from Twitter and Meta.

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The author of the letter from Kobeissi, a weekly commentator on global capital markets, noted that technology companies have already laid off more than 20,000 workers, more than during the entire dot-com bubble.

“Right now it’s almost damage control and certainly a bearish indicator for the markets and the economy in general for 2023,” said Mina Tadrus, managing director of Tadrus Capital, a high-yield and fixed-income quantitative hedge fund. : 2.5% return per month.

He told FOX Business that once one company starts laying off, it’s easier for others to follow. “It’s almost socially acceptable and everyone understands it.”

Kobeisi expects corporates to feel downside pain through at least mid-2023.

“As interest rates continue to rise and consumers struggle to stay on top of spending, we expect more cuts and possibly more investment-grade bond issuance to help corporations build a safety cushion as the recession worsens,” he said. :

An opportunity for investors

Business person accounting, calculation, budgeting and investing and saving concept

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Certified financial planner Adam Soloff of Soloff Wealth Management says rising interest rates have allowed his firm to add higher-rated bonds to certain clients’ portfolios now that interest rates are high enough to generate significant returns.

“Given rising yields, especially for clients who prioritize safety and income, we are allocating a larger portion of our portfolios to investment-grade corporate bonds, as well as tax-free municipal bonds for those in higher tax brackets.” Soloff told FOX. Business.

The move by top-rated companies to the investment-grade bond market is expected to continue regardless of economic conditions or interest rate moves by the Federal Reserve. Many companies have bonds that mature in the near future. Others may refinance before the Fed ends its current rate-hike cycle.

Billions in bonds, thousands of job cuts

Apple CEO Tim Cook and the Apple logo in front of a graphic and a $100 bill

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Top-rated companies began falling in the bond market in August, when Apple, Intel and Facebook parent Meta Platforms issued investment-grade bonds: $5.5 billion for Apple, $6 billion for Intel and $10 billion for Meta, which borrowed for the first time. time

A few months later, they all announced layoffs or layoffs. Intel laid off thousands of workers in October, Bloomberg reports. Apple in November announced a hiring freeze for many jobs outside of research and development, Bloomberg also reported. Meta reduced its workforce by 13%, or 11,000 employees.

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Amazon, which sold bonds last month, is considering cutting up to 20,000 jobs.

Data compiled by Fitch Ratings show that U.S. companies issued five times more non-investment-grade bonds than “junk” bonds in October, $439 billion compared to $79 billion in high-yield bonds.

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