Investment-grade deal volume falls short for week; light June forward calendar eyed

By Cristal Cody

Tupelo, Miss., May 27 – The high-grade space almost saw a complete shut-out over the week ahead of the long Memorial Day holiday weekend with bond issuance coming up far short of forecasts.

Only two corporate deals priced with the issuers USAA Capital Corp. and Southwestern Public Service Co. printing $700 million of notes on Monday.

Syndicate desks were expecting about $20 billion of high-grade paper to print over the week before the bond markets closed early Friday for the holiday.

“That was very hopeful, even for IG,” a source said. “Issuers are slowing down; there’s not a lot of opportunity there.”

The SSA space boosted the week’s high-grade volume to $3.2 billion with covered note offerings from Santander UK Group Holdings plc on Tuesday and Bank of Nova Scotia on Thursday, a source said.

May supply is only totaling around $75 billion and is not expected to hit the $100 billion-plus range widely expected, sources said.

Investment-grade issuance was down 14% year over year through April to $222 billion, while high-yield bond issuance is down 75% for the period, according to a Fitch Ratings report on Wednesday.

“New issuance is normalizing near the 2019 level of $617 billion, after $1 trillion was issued in 2020 to bolster liquidity at the pandemic’s onset,” Fitch said.

High-grade issuers are expected to return to the primary market in the short week ahead with about $20 billion to $25 billion of bond supply, though the deal total could be upped with a large merger-and-acquisitions transaction waiting in the wings, a source said.

About $100 billion of volume is anticipated in the primary market in June, depending on volatility, sources reported.

New issues firm

The high-grade issues that did price over the week printed better than talk, and with the secondary market starved for new paper, the bonds were trading tighter, sources said.

USAA Capital’s $500 million offering of 3.375% notes due 2025 (Aa1/AA) came 15 basis points tighter than talk and was upsized by $150 million.

The notes, priced at a spread of Treasuries plus 70 bps, firmed to 63 bps bid in secondary trading.

Southwestern Public Service’s 5.15% green first mortgage bonds due 2052 (A3/A) came in by the end of the week to 190 bps bid in the secondary market, a source said.

The notes priced in a $200 million tranche at a spread of 210 bps over Treasuries, tighter than talk in the 230 bps spread area.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.