(Bloomberg) -- Companies are looking to sell around $40 billion of U.S. investment-grade bonds next week, according to a dealer survey, but war-induced volatility could create unpredictable patterns of issuance.
High-grade issuers seized on relatively calmer financial markets this week, selling over $59 billion by 32 borrowers, well above the top end of estimates calling for as much as $30 billion. Issuers were willing to pay higher concessions to get deals done, a trend that's expected to continue next week.
February consumer price index data is set to be released on Thursday. And as the March Federal Reserve meeting inches closer, investors will be watching for data points on what rate hikes might look like, Kristina Hooper Invesco's chief global market strategist, said.
“We're going to continue to see volatility and movement around data points and Fed speak until the FOMC actually meets,” Hooper said in an interview.
Slow Junk Return
The U.S. high-yield primary market may see companies step forward with more bond sales next week if markets stabilize. Supply could reach $5 billion to $7 billion, according to people with knowledge of the matter, who asked not to be identified because the discussions are private.
That would mark an increase from the $2.2 billion this week, including a revived offering from BellRing Brands Inc., which had previously been shelved. The sluggish March sales follow the slowest February for issuance since 2016, according to data compiled by Bloomberg.
U.S. high-yield corporate bonds rallied over the last week, however, thrashing investment-grade, which is much more susceptible to rising rates. Strategists expect the debt to continue to do well, even as higher-rated bonds sell off, and this week's new issues traded higher in secondary markets in another sign of strong demand.
Whether the leveraged loan market will kick into a higher gear remains to be seen. So far, there are no lender meetings on deck next week and just a couple of commitments due on deals. Associated Materials' $550 million financing for its Strategic Value Partner buyout is due Tuesday, and Compass Power Generation, a privately owned portfolio of gas-fired power plants, has $650 million for refinancing due Thursday.
Only one company launched a loan offering this week, and three deals were withdrawn from syndication as geopolitical strain caused borrowers to rethink plans for financing.
Banks across Europe and the U.S., meanwhile, have committed to lend tens of billions of dollars for leveraged buyouts and acquisitions and will at some point need to find buyers for the debt so they'll be hoping that demand will improve.
In the distressed credit market, Ion Geophysical's forbearance on a skipped interest payment is set to expire on March 8 and Exela Technologies' stock swap expires on March 10.
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