US companies tap investor rush for junk Corporate borrowers with fragile balance sheets are ramping up new debt sales this week, taking advantage of strong investor appetite for the higher yielding securities and another drop in borrowing costs. Issuance of junk bonds in the US shot higher this week to $8.1bn, the highest weekly level in more than a month, as average yields on the securities fell to a record low, below 5 per cent on Monday. US housebuilder Toll Brothers, LBC Tank Terminals and Brunswick Corp joined another dozen borrowers with speculative credit ratings to raise funds this week, pushing year-to-date sales of high-yield debt close to $150bn, according to Dealogic. Low default rates and an improving US economy have supported the junk bond market as a whole, but demand for yield has become the biggest driver of investors" behaviour as they downplay high valuations for junk bonds and line up to buy the new debt. "These companies have no difficulty in finding buyers for their debt, in spite of the drop in yields," said Michael Collins, senior investment officer for Prudential Fixed Income. Average yields stood at 4.96 per cent on Thursday, according to Barclays. But returns on the securities, at an average 5.7 per cent this year, are still much higher than those offered by top tier corporate and government debt. Companies have taken notice of the strong appetite, which in turn has sparked a boom in issuance, with CCC-rated companies - the lowest credit ratings - raising cheap debt in near-record quantities. Sales of investment grade bonds have also picked in the last couple of days, with offerings by Berkshire Hathaway Financial and Northeast Utilities helping push this week's total to $25.5bn, according to Dealogic. Additional sales of both junk and investment grade debt are expected in coming days, with ANZ Banking Group due to sell two and five-year notes on Thursday. While investment grade corporate bonds are rated on the basis of an investor being repaid their principal with interest, the assumption behind junk debt is that the company selling the securities could at some point default on its obligations. "There's a reason why a company has a triple-C rating attached to it, but with so much liquidity in markets, they have been able to refinance existing debt at lower rates, extend bond maturities and get at a lower coupon," said Mr Collins. Financial markets are providing breathing room for many of these companies.