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High-grade supply quiet as focus on Fed; $15 billion to $25 billion forecast for week
By Cristal Cody
Tupelo, Miss., Aug. 1 – The high-grade primary market was quiet during Wednesday’s session with investors’ focus on the Federal Reserve’s meeting that ended during the session.
During the meeting, the Federal Open Market Committee decided to maintain the target range for the federal funds rate at 1¾% to 2%, noting that the labor market has continued strengthening since its June meeting and that economic activity has been rising at a strong rate.
More than $5 billion of bonds of high-grade bonds priced over the week’s first two sessions. American Express Co., Northern Trust Corp. and Pacific Gas & Electric Co. priced notes on Tuesday, while Norfolk Southern Corp., Southern California Edison Co. and Ryder System, Inc. were in the primary market on Monday.
Market sources forecast about $15 billion to as much as $25 billion of bond supply for the week.
Volume is expected to remain light in August at about $60 billion to $70 billion before resuming a strong pace in September, according to market sources.
“We have not changed our HG supply forecast for this year, which thus remains at $1.178 [trillion], or a decline of 16% from last year,” BofA Merrill Lynch analysts said in a note released on Wednesday. “That implies continued weak volumes – especially weaker European Yankee activity for the remainder of the year. August is seasonally the second slowest month of the year for supply after December.”
The month typically sees $67 billion of supply based on data from 2010-2017, while the $107 billion of bonds and $113 billion of paper issued in 2016 and 2017 were driven by large mergers and acquisitions related debt funding.
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