Mid-week hopes for a resolution to the Iran conflict and smoother functioning of the Strait of Hormuz encouraged investors to reengage with the primary market, prompting borrowers to opportunistically tap an open window.

Earlier in the week, borrowers had largely stayed on the sidelines, waiting for market nerves to settle - a strategy consistently employed throughout the Iran conflict.

Monday saw just two borrowers raise $5.6bln across two tranches, receiving mixed responses.

QTS led the day’s activity, with the Blackstone-backed datacenter operator issuing a $4.6bln 10-year green bond that attracted $9bln in final orders, or 1.95x coverage. Marvell Technology completed the slate with a $1bln 10-year offering that went straight to launch, reflecting a trend of accelerated execution to avoid volatility tied to Iran-related headlines. The deal garnered $5.1bln in demand, or 5.1x coverage.

Tuesday was similarly subdued, with ERAC USA Finance raising $3bln across three tranches. The deal drew $6.84bln in combined orders, or 2.3x coverage, with spreads tightening 20bp from IPT to pricing and the issuer paying 7.67bp in new issue concessions. Despite price sensitivity, investor demand for high-grade bonds remained evident, even amid volatility tied to the Iran conflict.

This underlying strength in demand paved the way for a flurry of issuance on Wednesday, as hopes for a resolution to the Iran conflict surged following President Trump’s announcement of a two-week ceasefire. The high-grade primary market roared back to life, with nine borrowers raising $25.85bln across 28 tranches.

Financial issuers dominated Wednesday’s slate, accounting for seven of the nine transactions - a trend expected to persist as earnings season begins next week. Yankee banks led the charge, with three foreign lenders raising $16.65bln in a strong showing for the sector. Mizuho Bank spearheaded the activity with a $7.5bln five-part deal spanning 3- to 20-year maturities. MUFG followed with a $5.5bln six-part callable offering, while Santander rounded out the group with a $3.65bln four-part senior non-preferred transaction.

Issuance metrics improved significantly on Wednesday.

Spread compression during bookbuild reached 30.5bp, compared to 20bp and 26.5bp earlier in the week. Book coverage rose to 4.5x, up from 2.3x and 4.3x, while new issue concessions dropped to 2.2bp from 7.7bp and 6bp, respectively.

Wednesday’s issuers likely felt their patience in waiting out recent volatility had been rewarded.

The execution reinforced the approach syndicate desks have been advocating since the onset of the conflict — wait for the right window rather than force issuance. Maureen O’Connor, global head of investment-grade syndicate at Wells Fargo, highlighted this dynamic during IGM’s latest webinar, noting that “the advice more and more in an environment like this for a borrower is don’t worry about competing supply. It is better to be one of many in a good market than to be on your own in a bad market.” (see: IGM Webinar: Market Insiders - What's Driving IG Supply This Year).

The surge in supply on Wednesday ensured weekly estimates were easily surpassed, with Thursday’s $1.5bln raised by Deutsche Bank and JBS adding to the tally. Friday was a quiet, no-deal day, but the week closed with a total of $38.45bln - more than double the average expected volume of $19bln.

Primary credit markets remain technically strong, offering borrowers a wide-open window regardless of the ceasefire’s longevity in the Iran conflict. Credit spreads on Thursday stood at 83bp, 3bp tighter than earlier in the week and just 10bp away from all-time lows. Despite recent widening due to market volatility, spreads continue to show a tightening bias, driven by robust investor demand for high-rated corporate paper.

This week’s activity highlights that as new issuance slowed, investors grew hungrier for yield on high-quality bonds, actively deploying cash inflows into their funds in search of a safe haven. Secondary spreads on most newly issued bonds tightened several basis points below new issue levels by Friday. For example, Mizuho’s 5yr bonds were 15bp tighter, while ERAC’s 10yr bonds were 9bp tighter.

Demand is expected to grow further, with April issuance projected to average $116bln, compared to over $200bln in the first quarter.

Meghan Robson, Head of US Credit Strategy at BNP Paribas, noted in IGM’s podcast that investors were underweight credit going into the conflict. “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 strength of credit despite risks lurking in the background in the US and even Europe was discussed in the latest IGM podcast. To listen, click here.

The market tone is holding steady on Friday and could spark brisk issuance activity next week if it remains so over the weekend.

Stocks stalled as Treasury yields and oil prices firmed after President Trump raised the stakes on this weekend’s negotiations with Iran, saying that he would know quickly if the talks were successful and warned that the military is ready to resume strikes if necessary.

All things considered though, the markets have a had a good week as war risk premia appears to be receding and investors look to a robust corporate earnings season beginning Monday.

Core inflation data (ex-energy) for March came slightly cooler than expected, keeping hopes alive for a rate cut later this year.

For next week, syndicates are expecting an average $35bln in new issue supply with a bulk of it coming from the big six US banks and other banks. There are some who expect the number to be smaller because they think, with expectations of lower regulatory capital requirements, and large amounts of debt issuance in the first quarter, US banks may not have enough debt requirements to raise post this earnings cycle. More on that when we talk to the market on Monday morning.