Assessing Sandy's Impact on the Bond Markets
Delayed by the storm, new issuance surged late last week. Plus, we examine the credit impact on utilities and munis.
The corporate bond market was essentially shut down last Monday and Tuesday and was dislocated on Wednesday. However, the new issue market came back with a vengeance on Thursday and Friday. The total amount of bonds priced for issuers we cover topped $19 billion, one of the largest two-day totals that we can remember.
While the market appeared to be able to handle this surge of new issues, this next week should be instructive as to the near-term outlook for the market. Abbott Labs ABT (UR-) subsidiary AbbVie is expected to issue more than $10 billion of notes in order to upstream cash to the parent company before being spun off into a stand-alone entity. This deal size is one of the largest investment-grade transactions, and how well the transaction is received and trades in the secondary market may affect the short-term direction of the corporate bond market.
David Sekera does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.