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Bonds: Last gasp before the August calm

Part 2
Bonds: Last gasp before the August calm (Part 2 of 5)

Are investors feeling overly cozy?

Volumes spike up

The new issuance volume for the week ended August 9 was almost $24 billion. Despite the strong volume, the amount was within the expected range of $20 billion to $25 billion.

US Leveraged Loan Market 2013-08-14Enlarge Graph

The week marked the fifth week in a row of volumes above $15 billion, which marked a solid comeback after a weak June. Last week was also the third busiest week year-to-date.

Investors feeling cozy

The lower rates volatility resulting from the uncertainty was cleared by the massive correction in June, as both issuers and investors felt more comfortable moving back into bonds (BND).

BND vs LQD vs IEI  2013-08-14Enlarge Graph

More recently, investors have ventured as well into long-dated deals despite the increased interest rate sensitivity that comes along with it.

Last week, nine out of every ten tranches priced had maturities above five years. This may change soon, as this week, three of the Federal Reserve Banks—Dallas, Chicago, and Atlanta—gave statements that hinted at tapering starting this September. Read on to learn why this matters.

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