THE US INVESTMENT GRADE NEW ISSUE MARKET
As a result of the Covid-19 induced lockdowns, many cash-strapped corporations - those who could - descended on the US public debt market in droves, raising an unprecedented $723bln in Q2 2020. That brought ex-SSA H1 issuance to an unheard of $1,214,331bln, topping all estimates for the year. Fun fact: 2020 high grade issuance is running 101.8% higher than last year at this time.
Along the way, many milestones were set including a quarter that produced (1) three of the top six busiest ex-SSA issuance months on record (2) the busiest ex-SSA issuance month on record (April’s $297.775bln) (3) and needless to say, the busiest issuance quarter, and half, of all time ($723.121bln and $1,214,331bln respectively).
One look at the top ten list of all-time busiest ex-SSA issuance days shows four of those slots (4,5,6 and 8) occurring since the 26th of March. Moving over to the same list, only this time, for busiest weeks, seven of those ten also belong to 2020, including the top spot (week of March 30/$118,105bln).
With interest rates at or near all-time lows, it's no wonder we saw more than a few deals priced with some of the lowest coupons ever recorded. By tenor, the lowest 3yr coupon ever recorded now belongs to Amazon's 0.40% $1bln offering, priced on June 1. The lowest 5yr coupon ever recorded, 0.75%, belongs to Merck's $1bln offering of June 16, while the lowest 10yr coupon is now Pfizer's $1bln 0.80% notes priced on May 18. As for 30yr bonds, Eli Lilly's 2.25% coupon (4/24/20) now holds the 30yr low coupon record.
Overall issuance (SSA-inclusive) also set numerous records this quarter. Year-to-date, overall issuance stands at $1,440,506bln, topping all estimates for the year, and as the books closed on H1, overall issuance was running 96.3% ahead of last year's pace. Like its ex-SSA counterpart, overall issuance has also set records: daily – four of the top 10 busiest days occurred this quarter; weekly – eight of the top 10 busiest weeks belong to 2020; monthly – five of the top 10 busiest months, including the top three spots, have come in H1. By the way, April produced an astronomical $370.175bln in overall new issuance.
While this quarter is not expected to produce anything near what we saw last quarter, it certainly won't disappoint. The "revised" average estimate for 2020 ex-SSA issuance is now $1.6trln, though there are some who believe we could see close to $2trln raised before the year is out.
Needless to say, this all hinges on the extent of the severity and longevity of the coronavirus outbreak. In any event, to start off the second half of the year it appears the Street is a bit less optimistic about the prospects of another record-breaking month.