(Bloomberg) – High-grade US primary markets are likely to slow down next week with preliminary estimates calling for around $ 15 billion of fresh supply which could include a sale of bonds from one of the major banks. Meanwhile, a busy end of October is ahead for leveraged loans with commitments due for at least 17 transactions.
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Investment-grade sales hit $ 51 billion this week – the sixth week of $ 50 billion this year. As the volatility that had rocked the markets in recent weeks subsided, issuers took advantage, driven by giant sales of AerCap Holdings NV and Goldman Sachs Group Inc.
That means October’s volume of $ 96.5 billion is already in line with expectations of $ 100 billion, with an additional full week in the month.
Investment grade bonds have so far allayed concerns about rate volatility, with the spread on the Bloomberg US Corporate Investment Grade Index holding steady at 85 basis points for five consecutive sessions this week against a backdrop of abundant supply. The 5-year Treasury yield recently hit a 20-month high of 1.24% amid heightened inflation concerns.
âAs attention turns to how quickly the Fed may need to tighten policy, IG credit investors will begin to feel pressure to shorten the duration to avoid a sudden revaluation of yields similar to a Taper. Tantrum of 2013, âCitigroup Inc. strategists led by Daniel Sorid wrote on Friday.
Bank of America Corp. strategists warned this week that a flatter yield curve due to higher short- and medium-term Treasury yields would cause problems for credit markets, as incentives for foreign demand are reduced.
Read more: BofA says flatter yield curve is bad news for corporate bonds
Looking ahead, another self-directed bond sale from one of the six big US banks is possible now that all have reported profits. Morgan Stanley, Goldman Sachs and Bank of America have already sold new debt following third quarter results.
Large borrowers, including Amazon.com Inc., Anheuser-Busch InBev, Apple Inc., Caterpillar Inc., Chevron Corp., Exxon Mobil Corp., Facebook Inc., General Electric Co., General Motors Co., Lockheed Martin Corp. . and Coca-Cola Co. are expected to report profits and also become candidates for the bond sale.
While risky assets like high yield bonds have so far succeeded in allaying macroeconomic concerns, “continued rate volatility could be a potential source of risk for valuations and at least create opportunities in the area of ââthe market. credit, “Barclays strategist Bradley Rogoff wrote on Friday.
Looming concerns over debt ceiling negotiations, exposure to China, inflation risks and Fed tapering offer the opportunity to consider secured rather than unsecured bonds, he said. added.
In primary markets, a busy week is ahead for US leveraged loans, with commitments due for at least 17 transactions. At least two bank meetings are on deck, for the Signature Aviation term loan and the term loan from packaging company TricorBraun Holdings Inc. funding its acquisition of glass packaging supplier Vetroelite.
LifeScan Global Corp., which is owned by affiliates of Platinum Equity, sells $ 800 million in variable rate notes, the first high-yield floats seen from Varsity Brands Holding Co. Inc. as of June 2020, according to the reports. data compiled by Bloomberg.
Platinum is looking to use the proceeds from the bond sale, as well as the proceeds from a loan offering, to refinance the debt that funded its debt buyout of the company to Johnson & Johnson in 2018. The roadshow will continue for much of next week.
Meanwhile, CA Magnum Holdings is selling $ 1 billion in five-year notes to finance the acquisition of Mumbai-based software company Hexaware Technologies by the Carlyle Group. The deal could come at a price next week.
In difficulty, the operator of the oil terminals Gulf Finance has scheduled the closing of its refinancing agreement on Monday as it seeks to reduce its borrowing and postpone maturities. Telecommunications company GTT Communications has a voting deadline on Tuesday for its bankruptcy plan.
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