This week was a litmus test of the extraordinary resilience of the US investment-grade primary market, which navigated unprecedented intra-day volatility as news - both good and bad - trickled in while books for new bond offerings were being built.

The strategy to tackle this uncertainty has proven solid, with syndicate bankers demonstrating their value through expert advice that enabled record issuance levels without imposing excessive new issue concessions.

Deal execution under these volatile conditions has been exceptional. While some borrowers paid slightly higher premiums, they successfully raised the funds they needed at reasonable costs, driven by the urgency to get deals done when issuance windows were available.

On Monday for instance better news headlines about the Iran conflict spurred some risk-taking in broader financial markets and opened a window of issuance for six US investment-grade borrowers.

They raised $7bln but some borrowers like Pacificorp which raised $2.5bln through a four-part bond offering of three-, five-, seven-, and ten-year first mortgage bonds, pricing spreads 25–30 basis points inside IPTs were judged to pay new issue premiums of 3–9bp compared to their outstanding bonds.

Similarly, ITC Holdings raised $900m through a two-part bond offering of five- and ten-year notes, pricing spreads 25–27bp inside IPTs but with concessions of about 9bp over their outstanding bonds.

This price sensitivity for some of the utility paper, after a rush of them so far this year, indicated investors were starting to seek a buffer in such paper against potential market sentiment shifts driven by developments in the Iran conflict.

The slightly higher concessions ensured heavy demand. ITC’s $900m offering garnered final books of $5.1bln for a 5.7x coverage, while Pacificorp’s $2.5bln offering got $14.2bln orders for a 5.7X coverage as well.

Some insurance sector borrowers like Progressive that issued $1.5bln in five and 10yr senior notes on the same day however paid no concessions showing investors were starting to differentiate between issuers in terms of their ask for risk compensation.

The emotional rollercoaster continued into Tuesday which again prompted 10 borrowers to forge ahead with new deals. The group raised $14.95bln.

This time around the demand for compensation was not as much with the average concession on the day moving down to just 3.19bp from 4.27bp on Monday but order book coverage was not as massive.

On Monday the average order book coverage was 5.2X but on Tuesday it had dropped to 2.7X.

The attrition rate from peak to final books on Monday was also 16.7% so sticky demand but on Tuesday it had increased to 27.9%.

The same trend of grabbing windows as they come continued into Wednesday with seven issuers raising $7.4bln across 12 tranches.

The tone felt similar to Tuesday, with supply again skewing toward Yankee financial issuers. LG Energy, Nippon Life, and DNB Bank combined to raise $4.2bln, or 57% of the day’s total.

Deal sizes remained on the smaller side, with the average transaction just over $1bln, as issuers continued to favor measured execution. Nippon Life’s $1.85bln two-part offering and LG Energy Solution’s $1.6bln four-part deal were among the largest prints on the day.

On the day spreads on new deals compressed by 30.5bp on average from IPT to pricing, while book coverage jumped to 5.25x, well above the 3.8x pace seen through the month. But concessions did tick higher to 5.79bp, the highest this week and slightly above the March average. Thursday saw just one deal from Macquarie Bank pricing a $1.25bln two-part deal, that was helped by an overnight Asian bookbuilding, at spreads that carried just two basis points in new issue concession.

Front-loaded issuance is becoming a norm, driven by news on the Iran conflict. If headlines are favorable, issuers rush to meet weekly targets; if not, they wait for sentiment to stabilize before executing deals on Tuesday or Wednesday. Thursdays and Fridays remain quieter, with next week likely to follow this pattern due to the upcoming long weekend. To minimize exposure to volatile intra-day markets, syndicates are also accelerating bookbuilding processes.

Secondary market performance showed new issues on average bid close to their pricing levels, with exceptions like WPP’s $600m 10-year bond, which widened by 15bp, and Apollo Global Management’s $750m 10-year bond, which widened by 8bp.

Issuance conditions overall remain constructive, supported by contained corporate credit spreads and strong demand.

The average investment-grade credit spread was 88bp on Thursday, 2bp tighter for the week and only 15bp away from its tightest level year-to-date, according to ICE BAML data. According to Lipper, for the week ending March 25, short and intermediate IG funds got $2.86bln of inflows.

Participants in IGM’s Market Insiders webinar and Credit Matters podcast highlighted the technical strength of demand for high-quality paper. Investors, positioned underweight in credit, are ready to extend exposure if positive news emerges, creating strong demand for high-grade bonds.

The average yield on IG bonds has risen to 5.13%, up from 4.82% at the start of the year, as investors seek yield pickups over risk-free Treasuries to insulate portfolios.

Elevated Treasury yields, a result of the rate-hiking cycle that began in 2022, have attracted yield-focused investors to the IG bond market. “The liquidity available to buy the new issue calendar is tremendous right now, and as long as yields remain elevated, that will keep a lid on how much wider spreads can go,” said Maureen O’Connor, global head of investment-grade syndicate at Wells Fargo, during IGM’s latest webinar, IGM Webinar: Market Insiders - What's Driving IG Supply This Year.

Meghan Robson, Head of US Credit Strategy at BNP Paribas, added, “The reason spreads haven’t widened more is potentially because investors were underweight credit, so they didn’t have the beta to trim here.” To listen, click on Credit Matters Podcast Ep3: Is the Bond Market Poised for a Major Shift?

The next episode talks about reverse yankees and interest rate differentials as central banks hint or markets talk about interest rate hikes due to the inflationary impact of the Iran conflict so please watch out for that too.

After this week’s $30.6bln issuance, March’s tally of $234.35bln makes it the second busiest March ever and the fourth busiest month of all time, keeping pace for a record issuance year.

This tally is only $24.4bln away from the busiest March 2020 and also the second busiest month ever which will be challenged next week as syndicates are expecting an average $21.5bln in supply.

But no surprises that market tone remains edgy.

Market slid into the weekend, pricing worst-case scenarios for the war in Iran and its impact on supply chain inflation. Both stocks and Treasuries fell as oil prices advanced after President Trump’s offer late Thursday to push the deadline for Iran to reopen the Strait of Hormuz was interpreted as simply extending the period of high energy prices and general uncertainty. Politically and financially, time is now an enemy.