Why all-time low Treasury yields and credit spreads are attractive to issuers

Last week’s investment-grade bond issuance

The primary investment-grade corporate bond market remained strong last week as reflected in issuance of $29.7 billion across 24 trades. On a year-to-date basis, the investment-grade bond market has seen issuance of $147.1 billion—much higher than expected. This was the fourth consecutive week of issuance over $20 billion. Barring the exception of the end of the week on April 17, the investment grade bond issuance has remained strong recently. The decline in issuance for the week ending on April 17 was caused by the shorted week due to Good Friday and the earnings season.

Why all-time low Treasury yields and credit spreads are attractive to issuers

The strength of the primary investment-grade bond market is largely attributable to low interest rates in an improving economic scenario. In an improving economy, credit spreads contracts as the operating performance of companies improves. However, our readers should remain cautious because the credit spreads are at all time low, which minimizes the possibility of any further drop in corporate bond yields.

The investment-grade bond market saw inflows of $2 billion in the last week. On year-to-date terms, the inflows stand at $37.5 billion.

Major bond ETFs such as the iShares iBoxx $ Investment Grade bond ETF (LQD) and the Vanguard Total Bond Market ETF (BND) gained last week. Investors willing to diversify into the investment-grade corporate bond market to gain additional returns can invest in ETFs such as the iShares iBoxx $ Investment Grade bond ETF (LQD). The iBoxx $ Investment Grade bond ETF (LQD) follows 600 highly liquid investment-grade corporate bonds with holdings in bonds issued by Verizon Communications (VZ), General Electric (GE), Apple Inc. (AAPL), etc.

To learn more about last week’s high-yield and leveraged loan issuances, continue reading the next part of the series.