Syndicate desk estimates for U.S. investment-grade bond supply in July are centered around $90 billion, as funding costs remain extremely attractive for issuers.
While that’s a slowdown from the more than $112 billion which priced in June, investors shouldn’t expect a full-on summer supply lull. The tightest high-yield and investment-grade corporate bond spreads in decades suggest U.S. companies have a growing incentive to issue debt over the coming months rather than wait until later in the year.
Treasury yields also remain low, and the spread differential between U.S. junk and high-grade bonds this week fell to 184 basis points, the lowest since July 2007. That’s creating plenty of reasons for both high-grade and junk issuers to keep borrowing.
Bank of America Corp. strategists are calling for $15 billion to $20 billion of high-grade supply in the coming holiday shortened week. They see potential for issuance to slow in the second half of the year because it was so heavy year-to-date — but they also note the attractive funding conditions.