Does the activity of the past day or two indicate that bond market issuance is actually shrugging off its summer slumber?
Bond pricings by issuers on July 25 and 26 alone include more than $11 billion of borrowing by firms such as Wal-Mart Stores, PNC Funding Corp., and Qwest Capital Funding, bringing the weekly total to over $13 billion so far this week.
Propelling this rush in large part: Absolute yields are as low as they have been at any time since late March. The average yield on a 10-year single-A-minus industrial had been trending downward throughout the month, accelerating sharply in that direction since July 18, when Federal Reserve Chairman Alan Greenspan gave the first of two semi-annual monetary addresses before Congress.
His message — that the economic slowdown would be more prolonged than his earlier forecasts would have indicated — gave solace to bondholders worried about inflation and signaled to the broader market that the Fed, which has cut short-term borrowing rates six times (275 percentage points) so far this year, would most likely do so again when the Federal Open Market Committee meets next month.
The fallout, at least over the last couple of days, has been impressive:
But while these deals, with their historically low yields, certainly look attractive from an issuer standpoint, bond industry insiders maintain that the past couple of days are hardly any indication of a resurgence to the record pace of issuance experienced earlier this year.
“Issuers have stuff to do,” says Dan Benton, who heads Deutsche Bank’s investment-grade syndicate desk in New York. “The beginning of the month was very slow, and many of them are making up for lost time, so at the end of the day, it’s still going to be one of the slowest months we’ve had recently.”
On the other hand, he added, “it doesn’t hurt that the market’s better, make no mistake about it.”