U.S. capital markets come back to a full work week likely to be loaded with a full plate of debt offerings, but only a smattering of action in primary equity issuance.
More than $3.7 billion of bond offerings, mostly investment grade, are lined up for the week and weeks ahead, with billion dollar deals expected from firms such as EOP Operating LP, a real estate investment trust, and Washington Mutual, a savings and loan.
Stock issuance is still expected to remain subdued in the coming week, with about $2 billion of issues expected to hit the primary market, including only one ($93.7 million) IPO. But this market segment will soon gain a great deal of attention, as the focus shifts towards anticipation of Accenture’s July 19 offering, which is expected to tip the scales at more than $1.6 billion.
Signals Mixed (At Best)
In the meantime, the debt and equity markets will come back to essentially the same set of facts that left investors in a funk before they headed out for the holiday.
In the absence of heavy volume and/or hard trading data, players have found themselves largely sidetracked by continuing speculation over the “true meaning” of the Federal Reserve decision late last month to break recent precedent and lower its interest rate target by only 25 basis points. As a result, values suffered throughout the holiday week, with “good” news coming only Friday, with the release of a higher than expected loss of non-farm payrolls, and an uptick (to 4.5 percent) of the overall unemployment rate for June.
The Dow Jones Industrial Average was off about 1 percent on the week while the Nasdaq composite lost about 7 percent.
In bonds, the 10-year Treasury was off only slightly, to yield about 5.36 percent. But virtually all forms of corporate paper lost ground on the week, with higher yields in evidence for just about all credit ratings other than single-B.
Barring any surprises, the only scheduled releases that should have comparable impact will also occur on a Friday. The Producer Price Index and consumer sentiment updates should both offer clues to the direction monetary policy may take when the Federal Open Market Committee next convenes Aug. 21.
Bond Issues Ahead
After a few weeks during which lower quality issues actually predominated, primary issuance of investment-grade bonds is expected to increase, with about $2.3 billion in the pipeline. Announced issues include:
In junk, a $1.4 billion pipeline includes:
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