July high-grade supply up from June; August volume forecast to thin; active week ahead

By Cristal Cody

Tupelo, Miss., July 29 – Investment-grade supply ended July stronger than expected, while bond volume is anticipated to dwindle in August and over the back half of the year.

July finished with nearly $90 billion of bonds priced after a boost from banks and financial issuers in the last half of the month, beating expectations in the $70 billion to $80 billion deal range for the month.

More than $18.5 billion of notes priced in the primary market this week in supply dominated by financial issuers for a second week on the heels of second-quarter earnings releases.

Volume came in lighter than forecasts of about $20 billion to $25 billion for the week.

Issuers over the week included American Express Co., Capital One Financial Corp., Royal Bank of Canada, Canadian Imperial Bank of Commerce and Morgan Stanley.

More than $45 billion of notes anchored by major U.S. banks priced in the previous week.

Volume over the month was up from June when about $70 billion of notes were issued.

August is expected to kick off with about $25 billion of issuance in the first week and remain light over the month as end-of-summer plans take hold, sources said.

The high-grade market is anticipated to post about $75 billion of supply in August with volatility dictating deal windows, according to market sources.

Global issuance forecast

Overall investment-grade bond volume is expected to decline from record post-Covid supply in 2020 and 2021.

S&P Global Ratings said in a report on Thursday that it revised its full-year 2022 issuance forecast “markedly lower, as first half weakness will drag down the full-year total, combined with little room for market optimism in the second-half.”

Global bond issuance is expected to shrink about 16% in 2022, according to the report.

S&P, though, noted that “these declines come for most sectors against two years' worth of unusually high issuance totals supported by extraordinary fiscal and monetary stimulus. In many cases 2022 could still match or exceed pre-Covid-19 issuance totals.”

Fitch Ratings said in a July 20 report that sharply higher interest rates and capital market volatility will weigh on U.S. non-financial corporate debt issuance through the year.

On Wednesday, the Federal Reserve raised interest rates by another 75 basis points following June’s 75 bps hike.

New issues priced this week mostly widened in the secondary market, including paper from American Express, Capital One, Kinder Morgan Inc., Royal Bank of Canada and Truist Financial Corp., a source said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.