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UPDATE 2-US high-grade bond market tallies US$22.65bn
March 6, 2017 / 2:58 PM / in 9 months

UPDATE 2-US high-grade bond market tallies US$22.65bn

* Tally marks second-largest day of 2017 so far (UPDATES throughout)

By John Balassi and Mike Gambale

NEW YORK, March 6 (IFR) - The US investment-grade bond market logged US$22.65bn in deals on Monday, the second-largest day of 2017 so far as borrowers looked to get ahead of a looming rise in rates.

Eleven deals launched in the week’s first session, which saw hefty trades from HSBC (US$5bn), Great Plains Energy (US$4.3bn) and Commonwealth Bank of Australia (US$3bn).

After Fed Chair Janet Yellen signaled last week that rate hikes are coming down the road, companies with funding needs came steaming into an already red-hot high-grade bond market.

Investors have ready money to put to work, and the surge of demand is allowing issuers to sell new deals at very favorable spreads.

“There is a very strong bid for high-grade bonds at the moment because there is a tremendous amount of cash ... looking for a home,” one senior syndicate banker told IFR.

“Money is coming here from everywhere, because there is still a decent yield pick-up in buying US dollar bonds,” he said.

“It is hard to see at least in the near term what will stop this momentum.”

It was already the fourth day of the year with primary volumes above US$20bn, according to IFR data, as the market has been booming since the November election win of President Donald Trump.

Average high-grade corporate bond spreads are 11bp tighter year-to-date and have moved 6bp tighter in just the past 10 days alone, data from Bank of America Merrill Lynch shows.

At just 118bp over US Treasuries, spreads are at their lowest level since June 2014.

“The main driver for the surge in issuance is that people don’t want rates to move away from them, while spreads are also nearing their 2014 tights,” said Mark Howard, head of US credit strategy at BNP Paribas.

”People will not want to be kicking themselves by delaying issuance, especially with risks around elections in Europe and the potential for both rates and spreads to back up. (Reporting by the IFR team; Writing by Marc Carnegie; Editing by Jack Doran)

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