Need any further evidence that the global hunt for yield and the ECB (and now BoE) corporate bond buying programs are having their desired effect?
Well look no further than August IG supply which just smashed an all-time record. Bear in mind, August is supposed to be the slowest supply month of the year. But not this year by-God. Have a look:
Here’s some color from the Squid:
“IG issuance in August easily surpassed $100 billion for the first time on record in what has historically been the slowest supply month of the year. With $117.2 billion pricing across 141 deals, the wave of supply has more than doubled the $51.6 billion average supply in August since 2000. The supply load was not heavily skewed by a smaller number of large deals, as the month retains its record total even after removing Microsoft’s $19.75 billion deal to fund the purchase of LinkedIn (Exhibit 5). Extremely low borrowing costs have ushered in this record supply wave, bucking the seasonal slowdown, as issuers take advantage of low yields globally (52% of the EUR global bond complex now yields below 0%).”
You should be reminded of the following graphic from BofAML:
Need further evidence of the foreign bid? Ok, how about this? …
The money goes where the yield is. And with Draghi and Carney driving down corporate yields, US IG is the only game in town.
Mind the flows.
From Goldman: “We expect continued strong supply through year- end, supported by strong investor participation as the demand technical remains strong in the USD IG market.”
Yeah, no shit.