US High-Grade Bond Sales Stall as the Cost to Sell Debt Spikes

September 19, 2022

US High-Grade Bond Sales Stall as the Cost to Sell Debt Spikes
Four out of the four companies seeking to sell fresh debt in the US investment-grade primary market on Monday stood down as issuers face increasing borrowing costs and negative market sentiment. With US indices opening in the red and markets being closed in both the UK and Japan, Syndicate desks on the street anticipated most issuers to pass on issuing said debt.
With the Federal Reserve meeting on Wednesday and lower expected issuance on Tuesday and Thursday, the estimated $15 billion to $20 billion in fresh bond sales for this week may prove challenging to reach. The market has been negative, and businesses continue to delay scheduled bond sales to avoid the increased volatility brought on by August’s inflation statistics. Last week sales performance was performed poorly with only 29% of the new issuances trading tighter in the secondary market.
As finance costs continue to rise and the yield on the 10-year Treasury rising to its highest level in 11 years on Monday, businesses wishing to raise capital in the US primary market will have to prepare to pay extra for any debt raised. This hawkish stance by the Fed in the face of inflation has lead to one of the most expensive periods in the main market in more than a decade.
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