US corporate bond spreads were steady to slightly wider on Friday as issuers finished unloading about $20 billion of bonds this week ahead of late August's summer doldrums. The market "is going to start slowing down," said Scott Radell, a portfolio manager at Barclays Global Investors in San Francisco.
"The second two weeks of August tend to be very, very slow. So everybody's probably trying to get their deals done now, because they're not going to be able to do anything until September," Radell said. Bond issuers jumped into action after the Federal Reserve decided on Tuesday to keep interest rates unchanged at 5.25 percent.
Siemens Finance NV priced $5 billion of bonds on Wednesday, and Credit Suisse USA, a unit of Credit Suisse Group, sold $2.5 billion of bonds on Thursday. Both deals were increased from their original size.
Also on Thursday, Bear Stearns Cos. priced $1.25 billion of bonds, and US drugstore CVS Corp priced a $1.5 billion sale. The final large deal to hit the market was a $1.4 billion issue from Travelport, the former travel distribution services unit of Cendant Corp, which priced on Friday.
"Following the Travelport deal, the high-yield new issue calendar is empty. It might be very quiet from here on out through Labour Day, especially with most earnings behind us now," said high-yield research firm KDP Investment Advisors in a note on Friday. This week's issuance wasn't fazed by news on Thursday of a foiled UK plot to bomb planes headed to the United States from Britain, market participants said.
"The high-yield market continued its march upward this week, gaining ground for the seventh week in a row as the Federal Reserve took a much anticipated pause," said Fitch Ratings in a research note.
"Even the news of the alleged terrorist plot to bomb airplanes flying from London to the United States was not enough to derail the gain in the high yield market for the week," the note said. In fact, the US corporate bond market has absorbed $449 billion of high-grade and high-yield debt so far this year, $76.3 billion more than the same time period in the previous year, according to data firm Dealogic.
The new debt this week was absorbed well, with spreads on the $1.25 billion deal from Bear Stearns and the $2.5 billion deal from Credit Suisse trading tighter on Friday morning.
While airline bonds dipped early on Thursday amid worries that bookings could be hurt by the news of the foiled plot, they have since recovered slightly, KDP Investment Advisors said.