Corporate bond issuance picks up after slow April

By Matt Tracy

May 10 (Reuters) - Several of the world's largest companies raised billions of dollars in new debt this week and last, in a mini-resurgence of a primary corporate bond market that had been held back by the U.S. regional banking crisis and recession concerns.

On Monday, 11 companies led by iPhone maker Apple AAPL.O, wireless carrier T-Mobile TMUS.O and drugmaker Merck MRK.N, issued $22.55 billion in bonds. The sales followed a similar 11-deal flurry of debt sales on May 1 led by Facebook parent Meta Platforms META.O and Comcast CMCSA.O.

So far in May these and other high-grade companies have raised a total of $57.5 billion, on pace to beat last month's $65.7 billion, which was the slowest April in a decade, according to Informa Global Markets data.

"Corporate bond spreads have retraced from the widening we saw immediately post banking and initial banking failures, so companies are saying now's a good time to come," said Natalie Trevithick, head of investment grade credit strategy at investment management firm Payden & Rygel.

The average investment-grade bond spread on Tuesday was 149 basis points over Treasuries after reaching a high of 164 basis points on March 15, according to ICE BAML data .MERC0A0.

"This month we have seen a wave of issuance from large companies as they have cleared earnings blackouts and are facing a reasonably steady rate backdrop," said Blair Shwedo, head of investment grade trading at U.S Bank.

But spreads remained higher than a February low of 120 basis points, as uncertainty surrounds the direction of Federal Reserve monetary policy and lawmakers on Capitol Hill remain deadlocked over a bill to prevent default on trillions of dollars in U.S. government debt. .

Monday's supply was met with strong investor demand. The bonds received $61.25 billion in orders, almost triple the amount sought.

On Tuesday, however, just four high-grade companies sold new debt led by BP Capital Markets America [RIC:RIC:BPCMA.UL], while four others postponed plans, according to Informa data.

The companies also rushed out on Monday to get ahead of any further market volatility that could come after the release this week of the latest U.S inflation data, according to market participants.

But consumer price index data on Wednesday came in line with market expectations, which could lead to favorable conditions for new bond issuance.

"A worse than expected inflation report would complicate issuer plans to tap the market, however that risk has gone away with this morning’s data release," said Andrzej Skiba, head of BlueBay U.S. fixed income at RBC GAM.

"We see well over $30 billion of new issue supply next week in U.S. investment grade, with upside risk to that number if some of the M&A-related supply decides to tap the market," he said.

(Reporting by Matt Tracy; editing by Shankar Ramakrishnan and David Gregorio)


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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