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Volumes Drop for High-Grade Corporate Bonds in Week to April 3

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Deals and volumes for investment-grade bonds

Trends in the primary corporate bond market inform investors about the terms at which new debt is priced. They can help you assess how your investments are performing in terms of yield. They also help you assess the credit risks and spreads across sectors and decide whether you want to invest in an issue that’s providing an attractive yield, given its associated risks.

Investment-grade corporate bonds took a nosedive to $4.0 billion in the primary markets in the week to April 3, 2015. This was 87.5% lower than issuance worth $31.9 billion in the previous week. The number of issuers fell to six, down by 14 compared to the previous week.

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Issuance fell in a holiday-shortened week with no issues priced on April 2. Markets shut down on April 3 for Good Friday. In March, yields were primarily influenced by the Federal Reserve’s policy statement released on March 18 and subsequent economic releases. For the last two weeks, economic indicators have painted a not-so-pretty picture of the economy. This has led to views of a later-than-expected hike in the federal funds rate.

This, in turn, may have a positive impact on Treasuries since it may keep yields low, which will keep prices higher. This may cheer investors in ETFs such as the iShares Barclays 20+ Year Treasury Bond Fund (TLT) and the iShares Barclays 7-10 Year Treasury Bond Fund (IEF).

Australia’s Telstra Corporation, Sweden’s Stadshypotek AB, and the United States’ Molex Electronic Tech (MOLX) were the highest issuers of bonds in the week to April 3. Principal Life Global Funding II (PFG) and Citizens Financial Group (CFG) were the other major issuers last week.

Issuance by quality and maturity

All the issues last week were fixed-rate. Looking at the credit ratings of issues, A-rated issuers were the most prolific. They made up 43.8%, or $1.75 billion, in issuance. They were followed by BBB-rated issuers, which formed 31.3% of the week’s issuance.

In terms of maturity, the largest chunk of issuance, which made up 50.0% of all issues, was in the five-year maturity category. It was followed by the ten-year maturity category, which saw 37.5% of the issuances. There was no issuance of >30-year maturity bonds, making it the fifth such week. However, perpetuals saw issuance worth $250 million after $4.35 billion issuance in the previous week.

In the next part of this series, we’ll highlight the major deals, including pricing, quality, and yields.

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