US company bond market issuance set to gradual amid market volatility By Reuters

By Matt Tracy and Davide Barbuscia

(Reuters) – Some company bond issuers are anticipated to delay gross sales this week, after market volatility triggered traders to trim company bond holdings in favor of safer U.S. Treasuries, in keeping with bond market individuals.

Weaker-than-expected employment and manufacturing progress information final week have stoked recession fears, hitting shares and inflicting traders to hunt security in U.S. authorities debt.

That has pushed down Treasury yields, which transfer inversely to costs, and triggered company bond spreads over Treasuries to succeed in their widest stage since January.

No investment-grade or junk bond offers priced on Monday, in keeping with Worldwide Financing Overview information, the thirteenth day this 12 months with out a deal exterior a Friday or a vacation.

Market individuals anticipate this week’s pipeline to comprise higher-quality names which traders deem comparatively secure, whereas riskier issuers will possible maintain off till unfold volatility subsides.

Utility sector issuers made up nearly all of high-grade bond choices on Tuesday, together with a $300 million 10-year first mortgage bond by Connecticut Mild and Energy.

“The latest fairness and credit score market volatility will not eradicate the pipeline altogether, however it’ll have an effect,” mentioned Chris Forshner, head of funding grade finance at BNP Paribas (OTC:).

“The issuers that can be most impacted are people who … want a really stable backdrop from which to promote new-issue bonds.”

Junk spreads – the premium traders demand to carry riskier, low-rated debt over Treasuries – rose to 393 foundation factors on Monday, the widest since November 2023, in keeping with the ICE BofA U.S. Excessive Yield Index.

Spreads for high-grade company bonds surged to 112 foundation factors on Monday, their highest since December, the ICE BofA U.S. Funding Grade Company Bond Index confirmed.

The strikes adopted a credit score market rally by means of many of the 12 months, as optimism across the U.S. financial system regardless of excessive rates of interest despatched traders trying to find yields.

Simply two weeks in the past, junk spreads hit their lowest stage since December 2021, whereas high-grade spreads have additionally been contained this 12 months, remaining effectively beneath 2023 ranges.

Nonetheless, the company bond sell-off has been milder than for different danger belongings corresponding to shares, and a few traders purchased again into company bonds on Monday after trimming publicity earlier within the 12 months in favor of high-yielding belongings.

Dan Krieter, director of mounted earnings technique at BMO Capital Markets, famous on Tuesday that purchasing made up 54% of BMO purchasers’ exercise within the high-grade market on Monday, the very best each day share since mid-June.

“They’re higher worth now than they have been,” mentioned Andrew Jackson, head of mounted earnings at Vontobel. “Having taken various danger out of our positions, we’re now including on the margin danger on the credit score aspect.”