Issuers like Wells Fargo and Verizon take advantage of low yields

High profile issuers step into primary debt markets

For the week ended June 6 (data sourced from Bloomberg), about $38.7 billion worth of investment-grade corporate debt (LQD) was issued in the primary market, bringing the total issuance to $697.32 billion in 2014. The healthy levels were a reflection of the low rates environment described in the preceding section. Major deals included debt issues by Wells Fargo (WFC), Baidu, AT&T, and Verizon (VZ).

Financial firms including Wells Fargo (WFC), accounted for 30.7% of the total weekly issuance, compared to other corporate borrowers, which made up 50.4% of the total. About 65.6% of debt issues involved maturities that were five years or lower. About 35% of debt issues were rated BBB, while the balance were rated A or above.

Floating rate gains ground, but fixed-rate issues dominate

A key statistic was the issuer preference for fixed-rate over floating rate debt—about 75.2% of total weekly debt issuance was priced as fixed-rate, compared to 24.8% as floating rate. Still, floating rate issues at $9.6 billion for the week, touched a weekly high for 2014. This implies that IG corporate issuers (VCIT) are looking to lock-in yields that are near record lows.

Secondary market trends

The week ending June 4 saw net inflows of $261.4 million inflows into investment-grade corporate mutual funds, down sharply from the $689.7 million reported for the previous week (source: Lipper). The week also saw the S&P 500 Index (VOO) finish at a record high of 1949.44, as positive economic data releases made their impact felt on the stock market.