High-grade and high-yield bond markets assess risks ahead of FOMC (Part 3 of 9)
Citigroup and CDP Financial
The week ending July 25 saw weekly investment-grade bond (LQD) issuance top $20 billion for the 22nd time this year. Issuance volumes in the week ending July 25 totaled $21.7 billion over 15 issues.
Major issuers included S&P 500 Index (VOO) component firms, eBay, Citigroup (C), Wells Fargo, Capital One Financial Corp., ConAgra Foods, and Broadcom Corp. (BRCM) (Data source: Bloomberg).
eBay issue was last week’s largest
eBay’s $3.5 billion, five-part issue was the biggest deal of the week. The A2 or A-rated borrower issued both fixed and floating rate notes as follows:
- $450 million in three-year floating rate notes
- $1.15 billion in five-year fixed rate notes
- $400 million in five-year floating rate notes
- $750 million in seven-year fixed rate notes
- $750 million in ten-year fixed rate notes
Other major deals in the Tech, Media, and Telecom (or TMT) sector included Broadcom’s $600 million, two-tranche offering of ten and 20-year notes.
Financial institutions top borrowers this week
Financials sector borrowers accounted for ~36% of total issuance or $7.95 billion—up by ~$0.1 billion over the week ending July 18. Major financials sector borrowers included Citigroup (C) at $2 billion, CDP Financial at $2 billion, Manufacturers Traders Trust Co at $1.7 billion, and Capital One Financial Corp. at $1.25 billion.
Wells Fargo also issued $250 million in floating rate notes. The company is one of Warren Buffet-led Berkshire Hathaway’s (BRK-B) “Big-Four” investments. BRK-B is the largest shareholder in the lender.
Other investment-grade issuance
Other corporate sector borrowers included Daimler Financial at $2.5 billion in fixed and floating rate notes and ConAgra Foods at $550 million in two-year floating rate notes.
Emerging market issuers made up over 25% of issuance volumes or $5.6 billion in the week ending July 25. This was the highest level seen over the past several weeks. Issuance was dominated by the $3 billion two-part Export-Import Bank of China offering. This consisted of two tranches of $1.5 billion each, issued over five and ten-year maturities.
You can read about secondary market trends in the investment-grade bond market over the past week in the next section.
Browse this series on Market Realist:
- Part 1 - Why high-grade and high-yield markets assess risks before FOMC
- Part 2 - Why eBay leads the surge in high-grade debt issuance
- Part 4 - High-grade bond yields stop on continued accommodation outlook
- Investment & Company Information
- Capital One Financial Corp.