US corporate credit spreads held firm on Friday as the new issue market ended more quietly after another busy week and the strongest month for new sales this year. Corporate issuers sold more than $118 billion in investment grade debt in September, "comfortably the biggest supply month this year," analysts at Barclays Capital said in a report on Friday.
"Despite the glut of supply, demand remains strong - most deals were heavily oversubscribed and priced at the tight end of initial indications," they said. Average corporate bond spreads ended Thursday at 184 basis points, the same level they have traded at for the previous six consecutive days, according to Bank of America Merrill Lynch.
The benchmark investment grade credit derivative index tightened to 103.5 basis points on Friday from 108.5 a week earlier, according to Markit Intraday. Corporate bonds have held firm in spite of heavy supply and negative headlines out of Ireland and Portugal.
New issues on Friday included $800 million in 8-year notes by Burger King and a $600 million sale of 6-year notes by AWAS Aviation Capital, according to IFR, a Thomson Reuters service. Some expect supply to ease in October, which will help prompt spreads to tighten.
"We believe supply pressure will abate in October to some extent and the economic data will modestly improve, allowing spreads to tighten," analysts at J.P. Morgan said on Friday in a report. "Large-scale Treasury purchases by the Fed, if undertaken as we expect, support lower spreads as well," they added.
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