[MORNING CALL:] A Baker's Dozen...

… or maybe even more. The reprieve in the three-day downward spiral in the equity markets gave high grade borrowers just enough confidence to proceed with their planned financing. After 10 prospective issuers stood down on Monday, seven thought it might be a good idea to take advantage of the lull in the broader markets’ trend to raise $6.77bln, bring ex-SSA issuance for the month to $15.595bln.

When all was said and one, the Dow closed higher by 294 points, though a far cry from the high of the day which was more than 400 points higher, while the S&P500 (+1.04%) and the Nasdaq (+1.03%) also recaptured some of their previous losses. However, the rotation back into the risk on trade took its toll on the safe haven Treasury market where yields coughed up some of their recent gains.

The benchmark 10yr note saw its yield back up 12bp to close at 3.90%, while the long bond yield jumped 12bp, closing at 4.18%. In the meantime, the 2yr note, the most susceptible to the vagaries of underlying interest rates, saw its yield spike 10bp to close at 3.99%, 23bp higher than its intraday high of Monday morning.

The three major indices closed out yesterday’s session with an impressive rally all the same, as recession fears appear to have subsided, for now, since the volatility in the market is expected to continue as (1) we get a clearer picture of what the Fed’s intentions are – we know they’re not about to impart an emergency cut on the market, which might prove to be counterproductive – (2) as we get closer to the Presidential election.

Also contributing to the selloff was the death of the so-called "carry trade," a strategy whereby traders borrow cheap currencies such as the Japanese Yen and buy higher-yielding currencies that has helped propel global markets with liquidity. However, an unexpected rate hike last week from the Bank of Japan as well as currency intervention laid the strategy to rest. But it appears the strategy may have been resurrected, after the BOJ promised to refrain from hiking interest rates any further while the global markets remain in a such volatile state, further calming the markets.

Futures are providing further evidence that investors have been mollified for now, as the Dow appears headed for another better than 300-point gain at the open, while the S&P500 (+1.24%) and the Nasdaq (+1.47%) are also looking at higher openings after rallies in both the Asian and European markets.

On the other hand, as investors regain their confidence in the “risk on” trade, the parking lot that is the Treasury market is emptying out, as yields continue to rise. The benchmark 10yr note is trading 4bp higher this morning at 3.94%, while the long bond yield shot up 5bp overnight to 4.23%, and the 2yr note saw its yield rise by 3bp to 4.02%, trading above 4.00% for the first time in a week. Corporate spreads, which having been steadily widening during the yield rally in the Treasury market, tightened 4bp overnight to where the average high graded bond is now trading 108bp over comparable Treasuries.

In any event, despite the steady rise in benchmark rates, high grade corporate borrowers appear ready to resume tapping the market as Meta Platforms (5-pt), BMW US Capital (6-pt), Sherwin-Williams (2-pt) and Volkswagen Group (4-pt) have already announced deals. But they probably won’t be alone, as at least eight or nine other issuers are expected to take advantage of another lull in the volatility in the broader markets to tap the high grade primary market.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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2024 HIGH GRADE ISSUANCE - 08/05 WEEK, AUGUST & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 08/07 CALENDAR

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