Thursday, 21 June 2018

Bond pipeline swells as issuers look to move after Fed meeting

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Bankers are prepping bond deals for issuers that want to move as soon as possible after an expected rate hike by the Federal Reserve on Wednesday.

Software company CA Inc was the only borrower in the high-grade market on Wednesday, as market participants awaited Fed chair Janet Yellen’s afternoon press conference.

But bankers said the pipeline was filling up for Thursday, with at least two deals - a Yankee bank and a US utility company - slated to announce in the morning.

“There should be quite a bit of competing supply,” said a syndicate banker.

Market participants said a rate hike was already priced in, but investors will be scrutinizing Yellen’s speech for any indications of the pace of hikes going forward.

“The rate rise itself is a non-event,” said a DCM banker. “But if the FOMC signals that the pace of tightening is at odds with market expectation, that could change things.”

The market is currently pricing in three rate hikes in 2017, in line with the latest dot plots from Fed members.

The broader bond market tightened on Wednesday after an uneventful trading day during Tuesday’s East Coast snowstorm. The CDX IG 27 index was 1.6bp tighter at 64.3bp, according to Tradeweb.

The S&P 500 equity index was up 7 points at 2,372.

Bankers said the poor performance of recent Yankee bank deals might force any Yankee borrowers to pay higher new issue concessions.

Swedbank and SEB’s recent bonds have been stuck stubbornly around reoffer since pricing, while BNP Paribas’ senior non-preferred deal from last week is trading 4bp wider than reoffer, according to MarketAxess.


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