U.S. Borrowers Crowd Market in Week of Jaw-Dropping Outflows

U.S. borrowers gave the primary market another shot of life.

(Bloomberg) -- U.S. investment-grade funds lost a record $35.6 billion this week, an unprecedented figure that dwarfs the fact that borrowers gave the primary market another shot of life Thursday.

The sum for the week ended March 18 blows through the previous record outflow of $7.3 billion from last week, according to Refinitiv Lipper. It’s almost hard to remember that seven issuers successfully brought new deals Thursday with such a massive figure reported later in the afternoon.

United Parcel Service Inc. and Walt Disney Co. were among those to capitalize on a somewhat better risk tone Thursday, as U.S. credit has been wobbly ahead of an expected stimulus package from Washington. Earlier, investors cheered the European Central Bank’s package of asset purchases, reopening the region’s market with four new debt issues.

In both regions, borrowers that have been brave enough to come forward have been among those with the highest credit quality, and tend to be frequent issuers, as has been the case with other rare opportunities for new debt offerings. Financial institutions are especially active in both regions, with Canadian banks leading deals in Europe, and several of the major U.S. banks bringing dollar offerings.

The cost to protect U.S. investment-grade debt against default has been on shaky footing all day, seesawing from tightening to widening. By contrast, a similar risk measure in Europe cheapened the most since 2011, as the ECB launched a massive bond-buying program to keep borrowing costs in check.

“It was very much needed as the market was clearly unimpressed with what Christine Lagarde had announced at the ECB meeting compared to what other global central banks had delivered,” said John Taylor, a portfolio manager at AllianceBernstein.


The U.S. investment-grade market blew through all statistics this week with a $35.6 billion outflow from mutual funds and ETFs. High-yield funds lost $2.91 billion, smaller than last week’s withdrawal.

  • UPS and Disney led the charge in the primary market, followed by deals from MetLife Inc., Citigroup Inc., Northrop Grumman Corp., JPMorgan Chase & Co. and Morgan Stanley. In all, they’re set to price $18.55 billion
  • Apollo has bought a chunk of a $2 billion loan arranged by a group of banks that will help United Airlines boost liquidity
  • AT&T is in discussions with banks for a new term loan of roughly $3 billion as part of an effort to explore financing options and help the company navigate rising costs in the market for short-term IOUs
  • Ford is drawing $15.4 billion from its credit facilities and suspended its dividend
  • UBS is mandatorily redeeming two leveraged exchange-traded notes tied to mortgage real-estate investment trusts, after the notes fell below a $5 minimum share value Monday
  • T-Mobile is prepared to close the Sprint merger and says the it continues to have the option to draw on committed bridge financing from 16 U.S. and global banks


Investors cheered the ECB’s stimulus package, as credit risk for the region’s companies fell the most-ever, and the primary market came alive with four deals. Riskier classes of Italian bank bonds and long-dated corporate notes were among the early gainers in European trading.

  • Still, activity has been limited to the safest borrowers. The German state of North Rhine-Westphalia sold euro notes while AXA Bank Europe SCF, Toronto Dominion Bank and Bank of Montreal all offered covered bonds, which are low risk because they’re usually backed by ring-fenced assets like mortgages
    • TD Bank was back in the market two days after pulling a sale of pound-denominated securities amid “adverse market conditions
  • In secondary markets, Additional Tier 1 notes of Italian lenders Intesa Sanpaolo SpA and UniCredit SpA added more than a cent on the euro, while long-dated notes from Engie SA and Orange SA also climbed
  • Sovereign bonds from Italy to Germany and France soared and yields plummeted across the region, even on Greek securities, which are now eligible for purchase by the ECB for the first time
  • The ECB’s pledge “is another step in the right direction,” said Guy Stear, head of fixed income research at Societe Generale SA. “Investors have a huge liquidity preference at the moment, as seen in how bonds have traded in Europe overnight, but this will not last forever”
  • London-based hedge fund Chenavari Investment Managers extended its gains this year to as much as 94% thanks to bets on credit-market volatility
  • Poland’s central bank bought a little more than a quarter of the 10 billion zloty of bonds ($2.4 billion) it offered to purchase in its first auction under a quantitative easing program announced earlier this week
  • U.K. company treasurers are now seeking more help from the Bank of England and banking industry to meet liquidity challenges


The change in sentiment is in stark contrast to Asia, where the worst credit rout since the global financial crisis continued. The cost of insuring against default in the region jumped to the highest since 2016, in a sign of the daunting challenges authorities face as the coronavirus pandemic fuels a stunning surge in financing costs.

  • Air New Zealand entered into a loan facility of up to NZ$900 million ($512 million) with the government
  • Policy makers are trying to prevent a chain reaction of defaults, with the Reserve Bank of Australia adding steps to help businesses and South Korea boosted support for small companies, and will create bond and stock market stabilization funds. India’s central bank stands ready to take more steps to contain yields
  • Asia investment-grade dollar bond spreads were about 20 basis points wider on Thursday morning, according to traders. That put them on course for the worst-blow out since 2013, according to a Bloomberg Barclays Index
  • The Markit iTraxx Asia ex-Japan index of credit-default swaps was indicated about 10 basis points wider, and the Markit iTraxx Australia 20 basis points out earlier, according to traders
  • Yields on Indian local-currency corporate bonds were indicated higher Thursday and the rupee weakened to a record low against the dollar despite central bank measures there Wednesday to add liquidity
  • Beijing Capital Airlines said trading of two of its assets-backed securities has been suspended from Thursday as ticket revenues have been hurt by the pandemic
U.S. Borrowers Crowd Market in Week of Jaw-Dropping Outflows

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