First quarter posts record high-grade supply; slower pace eyed for April, second quarter

By Cristal Cody

Tupelo, Miss., March 28 – Booming record first-quarter investment-grade supply is expected to slow in the second quarter, which kicks off when the bond markets reopen on Monday after the long Good Friday holiday weekend.

About $20 billion to $25 billion of issuance is anticipated in the post-holiday week’s primary action, according to informed sources.

April is expected to post about $100 billion of issuance, give or take a bit, sources said.

The month typically is not volume-heavy with under $100 billion of notes priced on average, a source said.

Investment-grade corporate issuers packed supply in over March and in the front half of this week.

March was closing out with around $140 billion of investment-grade paper sold in the primary market, either registered with the Securities and Exchange Commission or in Rule 144A and Regulation S offerings.

Supply came in slightly better than expectations of about $135 billion of high-grade bond volume for the month.

Volume this week also beat forecasts of about $20 billion of primary action.

Over $24 billion of notes were sold from 18 issuers in just three sessions in the final week of March with volume led by multiple-tranche offerings from BMW US Capital LLC on Monday and Glencore Funding LLC on Tuesday.

High-grade issuers stood back on Thursday with the bond markets set to close early at 2 p.m. ET ahead of the Good Friday holiday.

The investment-grade market remained active with others planning possible transactions, a source said.

Public Service Co. of Colorado (A1/A) held fixed-income investor calls surrounding its sustainability program on Thursday via Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Mizuho Securities USA LLC.

The Xcel Energy Inc. subsidiary may price a first mortgage bond, the source said.

First-quarter record

First-quarter investment-grade volume totaled around $530 billion, the highest first-quarter supply on record and ahead of the prior first-quarter supply record of $510 billion in 2020, according to a BofA Securities note this week.

The only quarterly supply that was higher was back in the second quarter of 2020, a market source said.

A slower deal pace is expected in the second quarter, in part due to the pull of issuance into the first quarter, market sources reported.

“The pace of primary market activity in January and February was unsustainable, suggesting issuers likely front-loaded borrowing into the first quarter,” according to the BofA note. “Earlier this year very strong demand clearly stimulated the primary market volumes. More recently in March, however, new issue performance weakened. This suggests that very strong demand is no longer a strong tailwind for issuance volumes.”

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