Apr 16, 2022
High-Grade Bond Issuance Expected to Pick Up After Bank Earnings
Bloomberg News
,![An office worker enters the JPMorgan Chase & Co. headquarters in New York, U.S., on Thursday, July 22, 2021. After a year of Zoom meetings and awkward virtual happy hours, New York's youngest aspiring financiers have returned to the offices of the city's investment banks, where they're making the most of the in-person mentoring and networking they've lacked during the pandemic., Bloomberg An office worker enters the JPMorgan Chase & Co. headquarters in New York, U.S., on Thursday, July 22, 2021. After a year of Zoom meetings and awkward virtual happy hours, New York's youngest aspiring financiers have returned to the offices of the city's investment banks, where they're making the most of the in-person mentoring and networking they've lacked during the pandemic.](/polopoly_fs/1.1752810.1650140578!/fileimage/httpImage/image.jpg_gen/derivatives/landscape_620/an-office-worker-enters-the-jpmorgan-chase-co-headquarters-in-new-york-u-s-on-thursday-july-22-2021-after-a-year-of-zoom-meetings-and-awkward-virtual-happy-hours-new-york-s-youngest-aspiring-financiers-have-returned-to-the-offices-of-the-city-s-investment-banks-where-they-re-making-the-most-of-the-in-person-mentoring-and-networking-they-ve-lacked-during-the-pandemic.jpg)
(Bloomberg) -- U.S. investment-grade bond issuance is expected to pick up next week, with preliminary Wall Street estimates projecting $25 billion to $30 billion of new supply.
All eyes will be on the big six U.S. banks, which often issue new debt in the days following their earnings reports, and are typically strategic about when they borrow due to capital-intensive business models.
Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, Citigroup Inc. and Wells Fargo & Co. all reported earnings this week, and Bank of America Corp. is set to follow on Monday. Self-led bank deals are a wild card for next week, Bloomberg’s Michael Gambale wrote, and could turbo-boost supply beyond current estimates.
Other investment-grade issuers reporting earnings next week include Johnson & Johnson, Halliburton Co., Lockheed Martin Corp., Procter & Gamble Co. and AT&T Inc.
The high-grade primary market showed some signs of fragility this week, with three deals that failed to find footing during syndication and eventually sold at initial price talk. Issuers sat on the sidelines Thursday to wrap up the holiday-shortened week, and $17 billion of new debt priced in all.
Volatility continues to grip the investment-grade market, which is down 10.5% so far this year on a total-return basis. Strategists don’t see the trouble ending any time soon.
“Credit spreads are more volatile than at any point since the Great Financial Crisis, outside of early Covid,” Barclays Plc strategists led by Brad Rogoff wrote Thursday. “We expect spreads to trend wider as macro uncertainties abound and the focus turns to earnings for negative surprises.”
High Yield
A near-freeze in junk bond issuance looks set to continue, with no known deals in the pipeline heading into next week. Oldcastle BuildingEnvelope Inc., the only junk deal in the market this week, struggled and had to sweeten terms to entice investors.
Read More: Secured Bond Nixed, Pricing Sweetened on Oldcastle Buyout Debt
New junk bond issuance is expected to stay light as most borrowers have refinanced in the last two years and have enough liquidity, with no large maturities in the near term.
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The U.S. leveraged loan market is also quiet, with no bank meetings scheduled heading into the week. Six deals have commitments due, including Penn National Gaming Inc.’s $1 billion term loan to refinance debt.
“Broader high yield cannot stabilize before investment grade does,” Bank of America Corp. strategists led by Oleg Melentyev wrote Thursday.
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