One week later on Wednesday than in 2022, when issuance reached that milestone during the first week of October, gross new issue in the US investment-grade market crossed the $1 trillion mark. For the balance of the year, around $200 billion in new sales of high-quality bonds are yet to be made, according to David Del Vecchio, co-head of investment grade research at PGIM Fixed Income.
In response to the increase in interest rates, firms have responded by issuing fewer bonds with longer maturities, whose proportion of issuance is roughly 10% lower than prior averages, Del Vecchio wrote in an email.
Market participants estimate that blue-chip debt sales will total roughly $1.2 trillion this year. These estimates are mostly consistent with supply expectations from prior years, which predicted that high-grade bond sales would total between $1.15 trillion and $1.35 trillion by 2023. This comes after sales of $1.18 trillion in 2022.
Upon the release of these results, investors will be on the lookout for fresh issues, particularly from banks, as the third-quarter earnings season gets underway this week. The following companies are scheduled to release their quarterly earnings: Morgan Stanley on Wednesday, Goldman Sachs Group Inc. and Bank of America Corp. on Tuesday, and JPMorgan Chase & Co., Citigroup Inc., and Wells Fargo & Co. on Friday. Additionally, regional banks are expected to provide earnings results; PNC Financial Services Group Inc. is set to report first on Friday.
According to Newfleet Asset Management’s senior managing director and corporate credit analyst Ryan Jungk, “next week is probably the biggest week for the rest of the year.” After that, issuance is anticipated to decelerate, unless there are significant agreements to finance mergers and acquisitions, such as Microsoft Corp.’s acquisition of Activision Blizzard Inc., according to Jungk.
The US central bank will be keenly watching the upcoming Federal Reserve meeting, which finishes on November 1, as it considers whether to hike rates again this year. After Treasury yields increased recently, central bankers suggested that the current range of 5.25% to 5.50% would be adequate. However, Thursday’s core inflation number, which was stronger than anticipated, indicates that the Fed may want to maintain its choices.
Earlier this year, a number of massive transactions were announced, such as Amgen Inc.’s $24 billion purchase of Horizon Therapeutics Inc. and Pfizer Inc.’s $31 billion debt offering to help finance the acquisition of Seagen Inc., which is the fourth-largest US bond sale ever.
According to Moody’s Investors Service, almost $1.3 trillion in debt for investment-grade corporations is due between 2024 and 2028.