US bond markets keep on keeping on

摘要

US high-grade supply accelerated last week as issuers navigated choppy waters to price deals at interest rates many participants think are too good to pass up. Borrowers priced US$42.55bn last week by the end of play on Thursday, nearly doubling the supply from the week prior and taking the total about halfway to what syndicate desks expect will be a US$140bn month. The supply is all the more impressive considering some of the volatility in the market. It started the week prior with non-farm payroll numbers that missed estimates of one million new jobs with just 266,000 added in April. The volatility continued on Wednesday as consumer prices jumped by the largest amount in at least a decade, fuelling fears of prolonged inflation and resulting in the Dow Jones Industrial Average closing 680 points lower for the worst day in equities since January. While credit markets are taking these negative economic numbers better than equities, the bond market was not immune from volatility. LIBERTY MUTUAL postponed an announced deal citing market conditions. Multiple sources also said an unnamed borrower that was expected to issue some US$5bn or more in the week sat on the sidelines hoping for calmer waters next week. Despite those troubling signs, issuers such as AMAZON - which has little need for more cash -ended a prolonged absence from the bond primary to print an US$18.5bn eight-part bond last Monday at record-low rates. "When I get concerned is when you start to see a lot of correlation between the fixed-income market and the equity market - that suggests a pretty unhealthy situation and we haven't seen that so far," said Bob McMinn, head of debt capital markets in the Americas for Credit Suisse. "The impact on investment grade has not been material. Deals are still three to four times oversubscribed and our accounts are not expressing the same concerns around inflation that equities are."