[MORNING CALL:] No Let Up in Sight

For the twenty-sixth week this year the Street has once again underestimated the resolve of corporate borrowers to get the financing needs met, and in only two days mind you. In the span of those two days 48 borrowers through 86 tranches, have raised $71.925bln, blowing away all weekly estimates. That already makes this week the busiest ex-SSA issuance week of the year and the seventh busiest week on record.

While nothing compared to Tuesday, 19 more issuers raised $28.65bln yesterday to go along with Tuesday’s record breaking 29 issuers, who raised $43.275bln. And it’s only Wednesday. But can this constant flow of issuance continue?

Apparently, yes. Aside from Woodside Finance Ltd (10s and 30s) and UBS Group AG (perpnc5.5 AT1 bonds) announcing deals overnight, we’re told to expect at least another 10 would-be borrowers to assess market conditions after the release of some sensitive economic data – ADP private payrolls (99k versus 145k) and initial jobless claims (227k versus 230k) – and ahead of tomorrow’s jobs report (165k).

The volatility that is bound to occur in the run up to the Fed’s interest rate decision later this month, whether it be 25 or 50bp - currently, traders in the Fed Funds futures market see a 57% chance of a 25bp cut later this month, with a 43% chance the Fed slashes rates by 50bp - and the upcoming presidential election, appears to have compelled borrowers to come forward sooner rather than later.

At the same time, more and more companies are determined to bolster their balance sheets, just in case the economy continues to slow. And, why not? They apparently have a ready, willing and able audience. Demand has been a major catalyst in the flood of issuance this year, with ex-SSA issuance is running 28.2% ahead of last year.

This week’s deals have met with a more than warm reception from the investing community. On average, this week’s deals have contracted 29.6bp from IPT/PX; been 3.74x oversubscribed; and have priced with an average NIC of 2.35bp. That compares quite favorably to the y-t-d averages of a 27.4bp contraction, a 3.8x oversubscription rate; and an average NIC of 2.9bp.

As for market conditions this morning, futures are pointing to a lower open for the three major averages. This after the market, at least the Dow, bounced off Tuesday’s thrashing. At the same time, Treasury yields continue to fall as investors seek safer havens. The benchmark 10yr note is now trading at 3.74%, 17bp lower on the week, while the long bond yield (4.05%) has shed 15bp since Friday.

On the short end, the 2yr note, which closed out the month of August trading at 3.91%, is nearly 20bp lower on the week at 3.73%. The recent rally in Treasuries has caused corporate spreads to widen this week, with the average high grade bond now trading 99bp over comparable Treasuries, wider by 3bp on the week.

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2024 HIGH GRADE ISSUANCE - 09/02 WEEK, SEPTEMBER & 2024 ESTIMATES

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2024 HIGH GRADE ISSUANCE - RECENT MANDATES

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2024 HIGH GRADE ISSUANCE - 09/05 CALENDAR

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2024 HIGH GRADE ISSUANCE - 09/04 PRICINGS

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