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Credit Insights

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.

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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.

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David Sekera does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.