Investment-Grade Corporate Bonds Fell Due to a Short Week

Deals and volumes

High-grade bond issuance was down last week due to the holiday-shortened week and global uncertainty. However, investors are attracted to the US bond market due to better yields—compared to other developed countries.

Investment-grade corporate bonds worth $26.2 billion were issued in the primary market in the week to July 8, 2016. High-grade issuance stood at $31.7 billion in the previous week. The number of issuers fell slightly from 17 in the previous week to 16 last week.

Investment-Grade Corporate Bonds Fell Due to a Short Week

Funds such as the iShares Intermediate Credit Bond ETF (CIU) and the Vanguard Intermediate-Term Corporate Bond Fund (VCIT) help you invest in high-grade bonds.

Major issuers

Sumitomo Mitsui Financial Group (SMFG), National Australia Bank, Toronto-Dominion Bank (TD), and The Walt Disney Company (DIS) were among the large issuers of investment-grade bonds in the week to July 8.

Issuance by quality and maturity

Fixed-rate issues formed 94.3% of the total issuance, while floating-rate issues worth 1.5 billion were issued last week.

Looking at the credit ratings of issues, A rated issuers were the most prolific. They made up 32.5%, or $8.5 billion, of the total issuance. They were followed by AA rated issuers, which formed 26.8% of the week’s issuance. Meanwhile, AAA rated papers formed 26.4% of the total issuance.

In terms of maturity, the largest chunk of issuance, making up 33.8% of all the issues, was in the three-year maturity category. It was followed by the ten-year maturity category—it commanded 32.3% of the total issuance. The five-year maturity category made up 24.5% of the total issuance last week.

Long-term maturity category such as the 30-year made up 4.0% of the total issuance. Meanwhile, the greater than 30-year and perpetual categories didn’t see any issuance last week.

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