Bubble Watch: Jet Debt May Also Be Flying Too High

Bubble Watch: Jet Debt May Also Be Flying Too High

It isn't just bitcoin, penny stocks and blank-check companies that are attracting hot money. With the worst crisis in aviation history far from over, investors can't wait to buy planes again.

The world's top jet-leasing companies, including AerCap , Air Lease Corp oration and Avolon, have gone on a bond-issuing frenzy this January, borrowing about $15 billion at yields that often ranged between 2% and 3%—compared with about 5% last summer.

Then, a few days ago, private-investment firm Castlelake sold $595 million in aircraft asset-backed securities, a market that had been closed since last February. Safer A-tranches offer a yield of 3.5%, one of the best rates ever on commercial aviation ABS. On average, U.S. investment-grade corporate bonds return less than 2%.

The current situation is a confusing one. Markets have to juggle the bleakness of the present—global airline capacity is less than half what it was a year ago and the industry faces new travel restrictions—with the prospect of a vaccine-led rebound. But