A heavy new issue calendar weighed on the corporate bond market last week. Even though economic metrics point to continued economic expansion and earnings season winds down without too many negative surprises, the corporate bond market failed to follow the lead of the equity market, which hit new highs. In the investment-grade market, the average credit spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade corporate bond market) widened 2 basis points to end the week at +115. The high-yield market, which is typically more closely correlated to the equity market, was able to eke out a slight gain as the average spread of the ICE BofAML High Yield Master II Index tightened 4 basis points to +372. As an indication of how much the new issue supply weighed on the market, several issuers had to pay 10- to 20-basis-point concessions from existing trading levels in order to complete their offerings. Other issuers were able to sell their bonds at tighter concessions but were unable to tighten pricing to the lower end of their price guidance.
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