Yahoo Finance High-grade corporate bonds hit highest issuance
Investment-grade corporate bonds see second-highest issue on record (Part 3 of 6)
Deals and volumes for investment-grade bonds
Trends in the primary corporate bond market inform investors about the terms under which new debt is priced. They can help you assess how your investments are performing in terms of yield. They also help you assess credit risks and spreads across sectors so you can decide if you want to invest in an issue that’s providing an attractive yield, given its associated risks.
High-grade corporate bonds have hit their highest issuance so far in 2015. Corporate investment-grade borrowing spiked to $62.8 billion in the primary markets in the week ended March 6, 2015. This was 50.3% higher than issuance worth $41.8 billion in the previous week and the highest in 2015 so far. The number of issuers fell to 30, down by two compared to the previous week.
Issuance has picked up in recent weeks as corporations are looking to raise debt until the interest rate environment remains favorable. The Federal Reserve is expected to raise the federal funds rate sometime in 2015. When it does, it will point to an increasing interest rate environment in which corporate issuers may be required to pay more interest to creditors.
With positive economic releases, a hike may come sooner rather than later. This hike may negatively impact Treasuries due to an increase in yields. This will push prices lower and hurt investors in ETFs such as the iShares Barclays 20+ Year Treasury Bond Fund (TLT) and the iShares Barclays 7–10 Year Treasury Bond Fund (IEF).
Actavis plc (ACT), Exxon Mobil (XOM), and Abbott Laboratories (ABT) were the three largest issuers last week.
Issuance by quality and maturity
Most issues were fixed rate. They accounted for 94.0% of the week’s issuance. BBB rated issuers were the most prolific. They made up 48.6%, or $30.5 billion in issuance. They were followed by AA and A rated borrowers, which formed 15.5% and 15.2% of the week’s issuance, respectively.
In terms of maturity, the largest chunk of issuance at 28.2% was in the three-year category. This category saw the second highest issues in the previous week. The three-year maturity category was followed by the ten-year maturity, which saw 22.7% of the issues. There was no issuance of either >30-year maturity bonds or perpetuals, which together formed 9.2% of all issuances the previous week.
In the next part of this series, we’ll discuss the major deals, including pricing, quality, and yields.
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