Dose of rates realism in the wake of the FOMC (Part 3 of 5)
Investment-grade issuance picked up steam after the FOMC meeting
Last week, investment-grade bond (LQD) issuance remained sturdy, reaching $22.7 billion from 17 issuers. The week started front-loaded given the pending FOMC announcement on Wednesday, but there was a strong follow-up volume on issuances on Thursday after the Fed announced that it wouldn’t start tapering yet. Treasuries rallied, and the lower yields attracted issuers to jump into the market.
As a point of clarification, the spike the prior week was due to Verizon Wireless’s deal, which raised $49 billion across eight different tranches to finance the entire cash portion of the $130 billion acquisition.
Volume dominated by opportunistic deals
Half of the deals that priced Thursday were opportunistic, as several companies refinanced debt to take advantage of the blip in yields. The current week has remained strong as well, as issuers continue to take advantage of the possibly temporary yield contraction. Yields contracted today started to move back up again after unemployment claims surprised (305 thousand versus the 325 thousand expected), which will likely decrease the opportunistic volume for the rest of the week.
However, budget talks are starting to stall in Congress and the equity markets are starting to fear a government shutdown. A last-minute deal will very likely be struck. But still, the markets will remain volatile and likely drop until that moment comes.
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