Corporate bond issuance grinds to near halt

Wall Street banks U.S. investment-grade corporate bond deals matched all-time lows this week. It may reflect corporates' appetite more than investors'.

Wall Street
Brendan McDermid | Reuters

Even on a good day for trading, Wall Street hit yet another low last week.

Wall Street matched its all-time low for U.S.-marketed investment grade corporate bond outputs: One, which came late in the day Friday, according to Dealogic.

Every week there has been at least one corporate bond issuance on Wall Street, with some exceptions. Bankers often price no deals on the weeks of Thanksgiving, Christmas and New Year's Day when they are understandably spending a lot less time at their desks.

The same applies to the first week of any year, when business is still in a post-holiday lull (although, often, there are still deals lined up to kick off the year).

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Only in 2015 did Wall Street price just one investment grade corporate bond deal beyond those weeks, according to Dealogic data, which tracks financial market data back to 1995.

There's another disappointing trend in Dealogic's data: To date, there hasn't been a single week in 2016 where there were 10 pricings of corporate investment-grade issuance. That makes seven consecutive weeks where the bond market couldn't muster the might to take on 10 or more investment-grade bond deals—the first time that has happened since late 2008.

This week's output serves as a reminder of how far Wall Street's confidence has fallen as the Federal Reserve ponders the possibility of negative interest rates, less than two months after deciding to hike them for the first time in nearly a decade.

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While the data are stark, it's something the market may have seen coming.

There's good reason for big corporates to eschew potential bond deals: they can potentially get a better rate by waiting out the Fed. High-yield deals have been almost completely sidelined in the face of growing market turmoil. The Manitowoc Company priced last week's lone high-yield (or junk) deal, valued at $260 million, on Monday.

"Usually corporate bond issuance picks up as people expect rates to rise," said Erik Oja, banking analyst at S&P Global Market Intelligence.

And it looks as if the expectations that rates will rise are right now lower than they've ever been in the last 20 years, based on what Dealogic data show.

Correction: An earlier version incorrectly stated there were no U.S.-marketed investment grade corporate bond deals last week. This has now been fixed.