Bond markets are always the same at this time of year. Investors have lots of cash they need to invest and smart issuers take advantage of the liquidity, paying sensible new issue premiums and generally being flexible and accommodating. It is a happy time.
As January rolls on, borrowers get greedier and premiums come down. El Paso, an American junk-rated natural gas producer, is a particularly good example of how the rally has affected pricing. In December it paid investors a yield of 15.25% on its $500 million bond. Last week, it paid 9.25% on a carbon copy trade. Nothing had changed to make the company a less risky proposition -- it was...
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