Capital Markets

Bond-issue Volume Plunges in August

The 61.2 percent dropoff is greater than predicted and pushes new-issue volume to its lowest August level in six years.
Stephen TaubSeptember 8, 2008

The credit crunch continues to severely hamper corporations’ ability to raise capital. The latest evidence: the dollar volume of new-issue fixed income products fell off more than 60 percent in August versus a year ago, according to a report from Lehman Brothers.

The decline was 61.2 percent to $255.7 billion across 14 asset classes, including bonds issued by U.S. and European companies as well as sovereign bonds. That made it the worst August for new-issue fixed income products since 2002. The investment bank had predicted only a 50 percent drop.

August’s volume was down 32.6 percent from July’s $379.3 billion. Lehman noted that August is historically down only around 13 percent from July.

Lehman said new issuance in July decreased 52.4 percent from a year ago, although that was lower than the 70 percent drop it had reported for July a month ago.

The U.S. dollar volume was off 77.3 percent from last August. Looking at specific asset classes, investment-grade bonds decreased 69.8 percent year-over-year, high-yield bonds 78.3 percent, syndicated bank loans 84.6 percent, asset-backed securities 78.7 percent, residential mortgage-backed securities 95.2 percent, and commercial MBS 100 percent.

The only relative bright spot in the fixed-income market was municipals, which increased 4 percent.

In Europe, new-issue dollar volume for August decreased a total of only 24.2 percent, because investment-grade bonds shot up 102.2 percent. However, high-yield bonds decreased 68.6 percent, syndicated bank loans 35.6 percent, ABS 84.8 percent, RMBS 50.1 percent, and CMBS 100 percent.

Sovereign bonds decreased 28.9 percent in August, helped by the generally higher-quality nature of that marketplace, Lehman explained.