[MORNING CALL:] Forever 21

Until next week that is. Despite yesterday being the twelfth zero ex-SSA issuance day of the year, for the twenty-first time this week this year, high grade issuance topped the average Street estimate. Coming into this week, the respondents to our weekly issuance poll were looking for, on average, $30bln in new debt to be raised, while 13 borrowers combined to raise $31.504bln, landing it in the middle of the pack as the fifteenth busiest ex-SSA issuance week of the year.

The other day I was asked whether syndicate desks were incentivized to underestimate weekly issuance or were we just having a helluva issuance year? I think it's the helluva year we're having. While syndicate desks usually submit estimates a bit on the conservative side so as not to tip their hands, while self-funders almost never reveal their plans, some of the deals syndicate desks are working on are not ready for public consumption until officially announced. On the other hand, investor calls give a lot away.

This week s haul included the twenty-third M&A-related transaction of the year Occidental Petroleum s $5bln 5-pt offering to help fund its $12bln acquisition of CrownRock - bringing the total raised through such transactions to $101.75bln, or 10.31% of this year s ex-SSA total issuance. Last year there were 32 M&A-related transactions that raised $128.4bln, or 10.62% of the year s final tally.

It also included the fourth largest offering of any kind this year UnitedHealth Group s $12bln 8-pt deal surpassed only by Abbvie ($15bln), Cisco Systems ($13.5bln) and Bristol-Myers Squibb ($13bln). That brought ex-SSA issuance for the month to $103.204bln, only the third time in history that July issuance has topped the century mark and, making this month the busiest issuance July since $120.33bln priced back in July of 2017.

While we haven t seen it yet, there are some who believe issuance will begin to taper as the summer drags on and the closer we get to the presidential election in November, though that could be good news in the near term for investors, since many potential borrowers are likely to accelerate their financing plans while they have a receptive audience and tight spreads, ahead of the expected volatility that goes along with the run up to the election itself preliminary thoughts are that we will see next week add $25bln to July s issuance total.

That sort of thinking has already overheated the ex-SSA issuance market. Year-to-date, ex-SSA issuance is running at a 25.4% ($986.663bln vs $787.11bln) quicker pace than last year and a 22.8% faster pace than 2022 ($803.61bln), and with scores of M&A financings still needing to get done.

Last year there were 14 M&A-related transactions priced during the second half of the year, raising $40.2bln in the process. While some have argued that the upcoming election could put many M&A deals on hold, in 2020, the last time we elected a president, 25 M&A-related deals were priced between July and December, totaling $82bln.

Needless to say, it was a tumultuous week in the stock market and a volatile week in the bond market. A mixed bag of earnings, some good, some bad, wreaked havoc with the major averages, especially the tech-heavy Nasdaq. The Dow, after setting a new record high close last week, has retreated 1,263 points, while the same can be said for the S&P500, which is down 268 points from its own record closing high of last week. Then there s the Nasdaq that was decimated this week by weaker-than-expected earnings from the likes of Tesla and Alphabet. The average is down 546 points on the week. However, futures are indicating the major averages are attempting to make a second push to recover some, if not all, of this week's losses

Treasuries have been all over the lot this week, as the markets plodded through a number of key economic data releases, like earnings, some good, some bad. While the benchmark 10yr Treasury note yield, and the long bond yield were rather stable all week, vacillating no more than a couple of basis points on either side of 4.25% and 4.50%, respectively, the same cannot be said for the 2yr note, the most susceptible to the vagaries of underlying interest rates.

The 2yr closed out last week yielding 4.49% and is yielding 4.44% this morning. However, in between the yield traded in a 15bp range from a high of 4.50%, to a low of 4.33%. Corporate spreads widened out 2bp on the week, where the average high grade bond is now trading 95bp over comparable Treasuries.

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2024 HIGH GRADE ISSUANCE - 2024 VS 2023 COMPARISON

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2024 HIGH GRADE ISSUANCE - 07/22 WEEK, JULY & 2024 ESTIMATES

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