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Investment-Grade Corporate Bond Issuance Hits Near 3-Month High

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Deals and volumes for investment-grade corporate bonds

Investment-grade corporate bonds worth $55.4 billion were issued in the primary market in the week ended July 17, 2015. This was 41.2% higher than the $39.225 billion issued the previous week and the highest issuance since the week ended April 24. The number of issuers rose to 20 from 17 in the previous week.

Last week, Treasury yields (SHY) were mixed, with short-term yields rising while yields on longer-term maturities fell. Investment-grade corporate bonds, which tend to follow cues from Treasuries, pursued the falling trend in the longer-dated papers, even though yields had hit 2015 highs earlier in the week. A fall in yields led to a rise in the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD).

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Major issuers

CVS Health (CVS), Wells Fargo (WFC), Imperial Tobacco, PepsiCo (PEP), and Sumitomo Mitsui Banking, part of the Sumitomo Mitsui Financial Group (SMFG), were among the biggest issuers of investment-grade bonds in the week ended July 17.

Issuance by quality and maturity

Fixed-rate issues formed 93.9% of the total issuance last week. Floating-rate issues worth $3.4 billion were raised last week—the most since March 6, 2015. Looking at issuer credit ratings, BBB-rated issuers were the most prolific. They made up 47.6%, or $26.35 billion, of total issuance. They were followed by A-rated issuers, which formed 34.2% of the week’s issuance.

In terms of maturity, the largest chunk of issuance, making up 31.9% of all issues, was in the ten-year maturity category. It was followed by the five-year maturity category, which commanded 24.4% of the total issuance. Bonds of three-year maturity formed 15.3% of total issuance. The over-30-year-maturity category hasn’t seen any issuance since an issuance worth $500 million the previous week. Meanwhile, there was no issuance of perpetuals for the fifth successive week.

In the next part of this series, we’ll highlight the major deals of the week in terms of pricing, credit ratings, and yields.

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