by Tyler Durden at ZeroHedge
While traders were focused on today’s ECB meeting and the (spectacular) 30Y auction which initially pushed yields higher on supply concerns only to see them slide right back down after the huge buyside demand for ultra-long dated paper, the real action was in corporate bond land where the last few days have seen an unprecedented borrowing binge.
As Charlie McElligott wrote in his daily note, “after nearly $40B of deals Tuesday, there was another $28.2B across 19 issuers and 34 tranches yesterday, with the early look showing 14 deals in today’s pipeline already—just INCREDIBLE demand for Paper AND Duration.”
This “supply firehose” also caught the attention of BofA credit strategist Hans Mikkelsen, who in a note titled aptly enough…
… wrote that US investment grade issuance for the first two days of this week stands at $60.6bn across a record (for any two-day period) 39 deals; this compares to the previous two-day record was 36 deals immediately after Labor Day in 2019.
Indeed, while the post-Labor Day week is normally one of the busiest of the year in debt capital markets, the past three sessions have been among the most active ever.
While heavy supply over short periods can tend to weigh on credit spreads if investors start getting pickier, that has certainly not been the case this week, with Wednesday’s slate of sales seeing order books three times covered on average.
Some details on the supply deluge: the average new issue concession and break performance were in line with yesterday at an impressive +5bps and -2.9bps, respectively, meaning that bonds were promptly bid up upon breaking for trade as yield starved accounts simply could not get enough. The spread on the Bloomberg U.S. Corporate Investment-Grade Bond Index hasn’t budged this week, sitting at just 88 basis points.
And while BofA expected the unprecedented issuance spree to fade on Thursday, Bloomberg notes that the “firehose” of supply showed no signs of slowing Thursday amid what bankers and borrowers say are ideal conditions for high-grade companies to tap the bond market for financing…
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