If it seems like corporate debt has been an increasingly hot topic for me/us over the past few years, that's because it has been. 2014 was a record year for corporate issuance and 2015 isn't far behind. When corporate debt isn't moving markets, we tend not to discuss it. When corporate debt is obviously moving markets, sometimes there's very little else left to discuss. Today was the latter.
If the weakness was about the Fed, or anything to do with Fed expectations, we would have seen the losses led by the shortest end of the yield curve. Instead, it was 30yr bonds that took the biggest beating, followed closely by 10's. If there was a supporting role played, it was by the rebound in tradeflow momentum after Friday saw a one-sided rally for bonds. Still, corporates were the key factor.
Sometimes analysts who pay lots of attention to the corporate debt pipeline are very much in tune with which deals are likely to be announced. For instance, if they know that a big pharmaceutical company acquired another big pharmaceutical company for a certain amount of money and that some of the acquisition would be financed, they can do a great job of anticipating the extra supply that will be hitting bond markets, and thus indirectly causing weakness in Treasuries and MBS.
Other times, there are surprises. Today saw more of these surprising announcements from corporate bond issuers--especially from big banks. When Wells Fargo, UBS, and BNP blast markets with more than 6 billion dollars of unexpected bond issuance, not only does the extra supply take its toll, but we also might wonder what has these big firms in such a hurry. On top of the bank deals, there was a glut of other issuance.
MBS | FNMA 3.0 100-19 : -0-14 | FNMA 3.5 103-25 : -0-11 | FNMA 4.0 106-12 : -0-08 |
Treasuries | 2 YR 0.7100 : +0.0323 | 10 YR 2.1990 : +0.0654 | 30 YR 3.0160 : +0.0819 |
Pricing as of 9/21/15 5:48PMEST |