By Shankar Ramakrishnan and Matt Tracy
(Reuters) – U.S. company debt markets continued to be peppered by new bond choices on Wednesday as rising Treasury yields elevated demand for debt and pushed firms to get their funding accomplished now earlier than any additional improve in borrowing prices.
The primary seven days of the 12 months has seen some $75 billion of investment-grade rated bond provide – the busiest by way of the primary full week of a brand new 12 months in historical past, mentioned BMO Capital in a report.
The tally is anticipated to develop with three extra company and a few eight sovereign and supranational bond choices set to cost on Wednesday, in accordance with Informa (LON:) World Markets knowledge.
“There’s a rush amongst firms to get their funding accomplished now to keep away from growing borrowing prices with Treasury yields rising constantly over the previous week,” mentioned Clayton Triick, head of portfolio administration at Angel Oak Capital Advisors.
Funding-grade rated bonds worth at an expansion premium over risk-free U.S. Treasuries.
There are considerations {that a} sell-off in Treasuries and rise within the greenback that’s sending shockwaves by way of monetary markets might persist as uncertainty grows over U.S. President-elect Donald Trump’s insurance policies and its affect on an U.S. rate of interest easing cycle.
Investor demand at increased yields nonetheless has been sturdy pressuring company credit score spreads and not directly neutralizing the influence on funding prices on account of increased yields.
Usually, issuance volumes had been anticipated to wane after a rush of provide which might push spreads wider however this time round with increased yields prompting extra demand, spreads are anticipated to tighten again in, mentioned Hans Mikkelsen, credit score strategist at TD Securities.
So rising yields and tightening spreads are anticipated to assist each issuers and traders, and maintain alive the present issuance frenzy which is anticipated to renew after a quick lull.
An abbreviated session on Thursday in tribute to the late thirty ninth U.S. President Jimmy Carter and launch of jobs knowledge on Friday are anticipated to sluggish issuance.
Additionally, U.S. firms chorus from issuing bonds earlier than releasing earnings which might be anticipated to begin trickling in later this week.
Bankers predict wherever between $175 billion to $200 billion to be raised from new bond choices in January. If volumes reached $200 billion, it will mark solely the fifth time in historical past that month-to-month issuance topped that quantity, in accordance with Informa World Markets knowledge.
