Corporate credit spreads widen on Treasury volatility, equity sell-off
By Matt Tracy
Aug 2 (Reuters) -Corporate credit spreads widened and primary bond issuance came to a halt on Friday as equity markets sold off for the second day in a row, following data that raises expectations of a hard landing for the U.S. economy and more interest rate cuts in coming months.
The credit spreads or premium over Treasuries paid by corporate borrowers on investment-grade rated bonds were about 5-7 basis point wider on average Friday from Thursday levels. Junk-rated bond prices were also quoting about 5-10 basis points lower, investors said.
"It is not pretty out there at the moment with credit spreads on newly issued bonds widening out by as much as 5-10 basis points from where they were issued," said Scott Schulte, head of U.S. investment-grade syndicate desk at Barclays Capital.
The weaker ISM data on Thursday followed by the employment numbers a day after put fuel on the fire that the Fed may actually be behind the curve in their ability to successfully achieve a soft landing, he added.
U.S. 10-year Treasury yields US10YT=RR dropped as low as 3.79% on Friday, the lowest since December, and were last down 15.9 bps at 3.818%.
The drop came as Friday's data showed that nonfarm payrolls increased by 114,000 jobs last month after rising by a downwardly revised 179,000 in June. Economists polled by Reuters had forecast payrolls advancing by 175,000 jobs after gaining 206,000 in the previous month.
"We have been in an extremely low volatility period for quite some time now," said Connor Fitzgerald, fixed income portfolio manager at Wellington Management.
"Now I think there's some data that says...things are finally slowing. So if you start pricing even a small percentage chance of a recession, I think investment grade credit spreads will be very sensitive to that," he said.
The spike in market volatility is already increasing funding costs for investment-grade rated companies. The seven new deals that priced on Thursday paid an average 5.8 basis points more in new issue premium. This is higher than the average 2.72 basis points that companies paid to issue new bonds in all of July, according to data from Informa Global Markets.
Persistent volatility in Treasuries could slow the issuance momentum seen in corporate bond markets all through this year. Some $80 billion of new investment-grade bonds are expected to be issued in August, including the $8.8 billion of bonds issued on Thursday, according to IGM.
Reporting by Matt Tracy; Editing by Shankar Ramakrishnan and Toby Chopra
Activos relacionados
Últimas noticias
Descargo de responsabilidades: Cada una de las entidades de XM Group proporciona un servicio de solo ejecución y acceso a nuestra plataforma de trading online, permitiendo a una persona ver o usar el contenido disponible en o a través del sitio web, sin intención de cambiarlo ni ampliarlo. Dicho acceso y uso están sujetos en todo momento a: (i) Términos y Condiciones; (ii) Advertencias de riesgo; y (iii) Descargo completo de responsabilidades. Por lo tanto, dicho contenido se proporciona exclusivamente como información general. En particular, por favor tenga en cuenta que, los contenidos de nuestra plataforma de trading online no son ni solicitud ni una oferta para entrar a realizar transacciones en los mercados financieros. Operar en cualquier mercado financiero implica un nivel de riesgo significativo para su capital.
Todo el material publicado en nuestra plataforma de trading online tiene únicamente fines educativos/informativos y no contiene –y no debe considerarse que contenga– asesoramiento ni recomendaciones financieras, tributarias o de inversión, ni un registro de nuestros precios de trading, ni una oferta ni solicitud de transacción con instrumentos financieros ni promociones financieras no solicitadas.
Cualquier contenido de terceros, así como el contenido preparado por XM, como por ejemplo opiniones, noticias, investigaciones, análisis, precios, otras informaciones o enlaces a sitios de terceros que figuran en este sitio web se proporcionan “tal cual”, como comentarios generales del mercado y no constituyen un asesoramiento en materia de inversión. En la medida en que cualquier contenido se interprete como investigación de inversión, usted debe tener en cuenta y aceptar que dicho contenido no fue concebido ni elaborado de acuerdo con los requisitos legales diseñados para promover la independencia en materia de investigación de inversiones y, por tanto, se considera como una comunicación comercial en virtud de las leyes y regulaciones pertinentes. Por favor, asegúrese de haber leído y comprendido nuestro Aviso sobre investigación de inversión no independiente y advertencia de riesgo en relación con la información anterior, al que se puede acceder aquí.
