Bond Market Watch

After seeing billions of corporate bonds (mostly high yield) come to market and garner a large amount of subscription, the trend seems to be trending down. Borrowers issued at least $11.5 billion of debt this week, a 39 percent decline from the five-year average for the second week of July, and compares with $20.4 billion last week, according to data compiled by Bloomberg. Following the record pace of investment-grade bond sales during the first half of 2009, issuance may fall as borrowers cut back on capital expenditures. Yields over benchmark rates on speculative-grade debt widened 27 basis points this week to 1,079 basis points, or 10.79 percent, as of yesterday, according to Merrill Lynch’s U.S. High Yield Master II index. Yields rose 16 basis points to 13.14 percent.
Regal Entertainment Group’s Regal Cinemas Corp., the only junk-rated company to issue debt this week, sold $400 million of 10-year, 8.625 percent notes that paid a 560 basis-point spread, Bloomberg data show. The company is based in Knoxville, Tennessee. High-yield companies issued $4.26 billion the previous week. Rather than watching the Dow daily pay attention to the high yield market and whether new issue spreads are widening or tightening. In my opinion that is a better leading indicator. The link is available for the full Bloomberg article.