As earnings season picks up, so does investment-grade bond issuance

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Mar. 6 2014, Updated 3:17 a.m. ET

Bull run

Earnings season comes four times a year. Each season releases the quarterly earnings of a large number of publicly traded companies for the period ended December, March, June, or September. Last week was the follow-up week on the December 2013 releases. According to Street analysts, many corporates in the S&P 500 (SPY) that have reported earnings have gone on to beat estimates on an earnings per share basis. On a similar note, last week, investment-grade bonds (LQD) posted the straight sixth week in a row of positive issuance as suppliers looked to take advantage of the bull run in the market.

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Issuance was up 15%, to $18.5 billion from the $16.1 billion in issuance the previous week. A total number of 23 issuers came to market, with an average ticket size of $800 million—slightly lower than the over $1 billion we saw the previous week, when 16 issuers came to the market. The year-to-date issuance was $29.1 billion.

Last week’s issuance was up on the reaction of the declining U.S. ten-year Treasury rate. Investment-grade corporate bonds pay either fixed-term and floating interest rates that reference a benchmark such as LIBOR.[1. LIBOR stands for the “London Interbank Offered Rate,” and it’s the benchmark interest rate for many adjustable-rate mortgages, business loans, and financial instruments traded on global financial markets. Currently, the three-month LIBOR rate is 0.24%.] FRN (floating rate note) debt security tends to adjust its interest rate with changes in the prevailing market interest rates, unlike fixed-interest-rate bonds.

To learn about fund flows in investment-grade bonds last week, read on to the next part of this series.

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