Junk Firms Are Locking In Fixed-Rate Deals Before Costs Rise

High-risk borrowers in Europe are taking advantage of cheaper fixed-rate bonds to refinance floating-rate debt, cutting costs and buying protection against the risk of interest rate hikes.

An increasing number of companies have switched into fixed rates in recent weeks, tapping a deeper and more liquid market that currently offers a lower all-in cost than floating-rate products. Fixed-rate debt remains cheaper despite markets pricing in three rate hikes by the European Central Bank this year, versus none expected before the outbreak of war in the Middle East. Such a shift is typically a harbinger of higher bond coupons.