Why Treasuries were strong while investment-grade bonds were muted (Part 7 of 9)
Last week, investment-grade bond issuance declined, as Treasury yields across mid-term maturities increased with a rise in expected economic growth (except for short-term, ten-year, and 30-year bonds, which declined). The U.S. ten-year Treasury (TLH) yield was down 2 basis points, at 2.72%. About nine deals were printed, worth $15.5 billion—$900 million less than the previous week’s issuance of $16.4 billion. The average ticket size of the issuance increased to $1.72 billion—37% higher than the previous week’s average ticket size of $1.26 billion. The previous week, the number of issuers who tapped the investment-grade bond market was 13.
Investment-grade corporate bonds (LQD) pay either fixed-term or floating interest rates (or FRN) that refer to a benchmark such as LIBOR. Floating-rate debt security coupon payments adjust with changes in prevailing market interest rates, unlike fixed-interest-rate bonds such as Treasury bonds (TLT) and high yield bonds (JNK), whose coupon is fixed at the time of issuance and doesn’t change until maturity.
One of the major issuers the last week, United Airlines (UAL), issued a $949 million equipment trust certificate for fleet expansion. Please read on to the next part of this series to learn more about the issuer’s debt profile and issuance.
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