Just a few years ago, the market was as wide open as it had everbeen, allowing borrowers to raise money for anything andeverything. But times have changed. Even before this month's U.S.presidential election, companies had been selling the debt at theslowest pace since 2009, and the surprising outcome hasapparently chilled issuance even more.

Borrowers have raised just $11.4 billion so far this month, theleast for the period since 2008. While it might be easy to dismissthe development simply as a sign that borrowers have enough moneyfor the foreseeable future, under the surface it seems as if somebigger forces are at work. Investors don't seem to want to buyjunk-rated debt anymore unless they're amply compensated for therisk.

Consider, for example, a planned debt sale by Conduent, whichwas spun off from Xerox earlier this year. The new company hadabout $7 billion of revenue last year. It will provide services togovernments and industries, as opposed to selling the photocopiersand scanners that Xerox is known for.

While investors were starting to sour on corporate spinoffs lastyear, they've generally warmed to them in 2016, bidding up theirU.S. stocks by about 20%. So it's rather surprising that thecompany apparently failed to sell all $750 millionof B+ rated bonds that it had sought out to sell this month.Instead, it had to offer prospective investors substantially higheryields than it had planned while lowering the amount tojust $500 million, according to an article on Monday by ClaireBoston and Sridhar Natarajan of Bloomberg News. The company alsogave investors a discount on a $750 million term loan.

Perhaps part of this could be attributed to Conduent's plan touse the cash raised from the debt sale to pay a $1.6 billiondividend to Xerox for the spinoff. After all, that doesn't seemlike a particularly productive use as far as bondholders areconcerned.

But a more pervasive problem awaits speculative companies thatare looking for financing. The difficulties observed may be “justthe canary in the coal mine,” Compass Point's Charles Peabody wrotein a note. Conduent's difficulties may indicate “growingresistance” to buying junk bonds in a rising rate environment, hewrote.

Since Donald Trump was elected as the next U.S. president,Treasury yields have surged, with traders pricing in a 100% chanceof the Federal Reserve raising rates next month. The biggest bondinvestors are increasingly predicting that inflation will pickup. If investors can get higher yields in U.S. governmentbonds, they may be less inclined to pour cash into highlyleveraged companies that have higher default rates and have grownaccustomed to years of historically low borrowing costs.

Indeed, high-yield bond funds have experienced withdrawals thismonth and the debt has declined more than 1%. Conduent is justone company that has struggled to meet its financing needs intoday's junk-bond market. But it won't be the last.

Bloomberg News

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