TXU Tests Debt Market

Of course, there are reasons to believe there will be demand for some of the forthcoming deals. Bond investors have collected cash through coupon payments and maturing debt throughout the summer, with barely anywhere to reinvest it. Liquidity completely dried up in July and August. When the credit crunch started to wane, junk bond investors quickly exhausted the so-called bargains in their own secondary market in September, sending risk premiums back down.

Now, with virtually no new deals on the new issues calendar, many are turning to the loan market for bargains, say loan market participants. Some bond investors who are bearish on the economy are also increasingly attracted to loans. In the case of default or bankruptcy, loans are repaid first, ahead of bonds.

Still, recall that for all the relief about the success of the First Data deal, there is still over $10 billion in First Data debt left to place with investors. Then add TXU's $25 billion of debt to place and, just for fun, the huge slug of debt financing BCE's(BCE) $51 billion buyout.

The reception TXU gets should show how hearty the debt market's appetite really is.

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