Fresh supply in the U.S. investment-grade market is expected to be front-loaded next week ahead of the Federal Open Market Committee meeting Wednesday. Traders will be watching for any clues on when the Federal Reserve may begin tapering talk.
Syndicate desks are calling for $25 billion to $30 billion of issuance, a slowdown from the $35.95 billion that priced this week. The strong primary market sales come as investors continue to see a positive backdrop for credit.
A Treasury market rally this week that saw the 10-year yield hit its lowest in three months provided a serious boost to the year-to-date returns for credit markets. Total returns on the Bloomberg Barclays U.S. Corporate Bond Index are now down just 1.76% in 2021, after being -5.5% in mid-March.
“Credit investors have got a nice little extra boost from the rally we’ve seen in Treasury prices,” Drew Mogavero, co-head of U.S. credit trading at Barclays Plc, said Friday. “It allows them to focus on fundamentals, the good earnings picture we just had, and most importantly, the very low default rate environment.”