Corporate bond issuance picks up after slow April

VMware

10/05/2023 16:42

By Matt Tracy
       May 10 (Reuters) - Several of the world's largest
companies raised billions of dollars in new debt this week and
last, in a mini-resurgence of a primary corporate bond market
that had been held back by the U.S. regional banking crisis and
recession concerns.
    On Monday, 11 companies led by iPhone maker Apple  AAPL.O ,
wireless carrier T-Mobile  TMUS.O  and drugmaker Merck  MRK.N ,
issued $22.55 billion in bonds. The sales followed a similar
11-deal flurry of debt sales on May 1 led by Facebook parent
Meta Platforms  META.O  and Comcast  CMCSA.O . 
    So far in May these and other high-grade companies have
raised a total of $57.5 billion, on pace to beat last month's
$65.7 billion, which was the slowest April in a decade,
according to Informa Global Markets data.
    "Corporate bond spreads have retraced from the widening we
saw immediately post banking and initial banking failures, so
companies are saying now's a good time to come," said Natalie
Trevithick, head of investment grade credit strategy at
investment management firm Payden & Rygel.
    The average investment-grade bond spread on Tuesday was 149
basis points over Treasuries after reaching a high of 164 basis
points on March 15, according to ICE BAML data  .MERC0A0 .
    "This month we have seen a wave of issuance from large
companies as they have cleared earnings blackouts and are facing
a reasonably steady rate backdrop," said Blair Shwedo, head of
investment grade trading at U.S Bank.
    But spreads remained higher than a February low of 120 basis
points, as uncertainty surrounds the direction of Federal
Reserve monetary policy and lawmakers on Capitol Hill remain
deadlocked over a bill to prevent default on trillions of
dollars in U.S. government debt.  nL1N37617L .
    Monday's supply was met with strong investor demand. The
bonds received $61.25 billion in orders, almost triple the
amount sought. 
    On Tuesday, however, just four high-grade companies sold new
debt led by BP Capital Markets America  BPCMA.UL , while four
others postponed plans, according to Informa data.
    The companies also rushed out on Monday to get ahead of any
further market volatility that could come after the release this
week of the latest U.S inflation data, according to market
participants.
    But consumer price index data on Wednesday came in line with
market expectations, which could lead to favorable conditions
for new bond issuance.
    "A worse than expected inflation report would complicate
issuer plans to tap the market, however that risk has gone away
with this morning’s data release," said Andrzej Skiba, head of
BlueBay U.S. fixed income at RBC GAM. 
    "We see well over $30 billion of new issue supply next week
in U.S. investment grade, with upside risk to that number if
some of the M&A-related supply decides to tap the market," he
said.

 (Reporting by Matt Tracy; editing by Shankar Ramakrishnan and
David Gregorio)
 ((Matt.Tracy@thomsonreuters.com;))