Home > World Business
Wall Street Banks To Dominate Sleepy Primary Bond Markets
Morgan Stanley headquarters in New York.Photographer: Victor J. Blue | Bloomberg
October 16th, 2022 | 15:44 PM | 1517 views
UNITED STATES OF AMERICA
Investors are on the lookout for a wave of fresh bond issuance to wash over otherwise parched US primary markets as the nation’s largest lenders replenish their coffers.
The floodgates are expected to open in the coming week for new investment-grade bond sales by major US banks after earnings, with Barclays Plc betting on a total deluge this quarter of up to $45 billion.
Morgan Stanley was the first of the top-six largest US banks to tap markets with $6.5 billion of debt Friday.
Money managers are still watching for any new deals from JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co., which all reported earnings Friday. Bank of America Corp. will announce results on Monday, and Goldman Sachs Group Inc. will follow Tuesday.
“Volatility is not going to keep banks from going to market,” said Joe Boyle, a product manager at Hartford Funds, which has about $127.4 billion under management. “The expectation is they will be out again next week -- and likely the only participants out next week.”
Of course, most companies have been steering clear of primary credit markets as the Federal Reserve aggressively raises interest rates to fight the hottest inflation in 40 years. Higher borrowing costs and market volatility have resulted in even fewer bond deals than expected by typically conservative syndicate desks on Wall Street.
Excluding bank issuance, preliminary estimates suggest another subdued week ahead with around $10 billion in fresh debt. The average weekly volume for the investment-grade market this year is $25 billion.
Risk Keeps Climbing
Any major impact from an influx of new bank bonds will be hard to see from primary markets further down the credit spectrum. The US junk bond pipeline is bare after AMC Entertainment Holdings Inc. sold a $400 million junk bond Friday, offering a whopping 15% yield to lure buyers to the deal that will refinance debt at one of its units.
Yields on US junk bonds climbed toward 10% last week after a reading of September consumer prices came in above expectations. Yields on high-risk bonds rated CCC jumped to a 30-month high of 15.79%.
The risk-off tone was dampened further after investors yanked $712.6 million out of high-yield bond funds in the week ended Oct. 12, according to Refinitiv Lipper. Investment-grade funds saw their eighth straight week of withdrawals.
Leveraged loan markets are also thinning, with commitments for deals for Vericast Corp. and Citco Funding LLC due in the coming week. Large leveraged-buyouts deals, such as Tenneco, Nielsen Holdings and Twitter, are also on the radar.
A slew of distressed-debt issuers have interest payments coming due, including National CineMedia, Transocean, Carvana and Envision Healthcare.
Source:
courtesy of BLOOMBERG
by Josyana Joshua
If you have any stories or news that you would like to share with the global online community, please feel free to share it with us by contacting us directly at [email protected]