Issuance of corporate debt in the US and European markets is looking relatively strong year to date, however loans have tailed off significantly, according to investment bank Morgan Stanley.
In US investment grade (IG) issuance reached €20 billion last week, according to the bank’s data, with year-to-date (YTD) supply tracking at €1.074 trillion up 6% YoY. By contrast high yield issuance reached €6 billion last week, with YTD supply reaching €170 billion which is down 0.4% YoY although HY fund inflows are up US$11.4 billion.
For leveraged loans, YTD issuance has reached US$257 billion which is down 18.6% YoY.
European IG issuance is up 14% YoY after €4 billion of new issues lifted YTD volumes to €453bn (+14% YoY), just under half the value issued in the US, while high yield issuance increased by €1 billon last week, with YTD supply tracking at €95 billion (7.8% YoY).
These issuance levels are likely to be net positive for buy-side trading desks, with bond liquidity being higher around newly issued debt, which also feed pricing guidance into the market.
Although handling new issues is a time-consuming process, and one which buy-side traders feel they can add little value to, relative to secondary market trading, European markets have seen a drop off in secondary market volume which may allow traders some reprieve in tackling the new issues over summer.
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