High-grade bond sale pace to slow, but US$30bn week possible

By Will Caiger-Smith

NEW YORK, Jan 6 (IFR) - Syndicate desks expect around US$25bn-US$30bn of US high-grade bond issuance next week, about half of the whopping US$55bn in supply that priced between this Tuesday and Thursday.

With Yankee banks having dominated supply over the past three days, corporate credits are expected to feature more heavily next week, said bankers.

"We've kind of run the table as far as European banks go," a credit strategist told IFR. "We'll see some cooling of this white-hot pace of Yankee issuance as we move through January."

Some foreign bank issuers could still hit the market before they go into earnings blackout towards the middle of next week.

"I wouldn't be shocked to see HSBC do something," said a syndicate banker. "They have a ton of TLAC to do and if they bring a big deal, that could bring the numbers up significantly."

The majority of this week's new deals were trading tighter than reoffer in the secondary market on Friday, although there were signs of indigestion after the supply binge.

Lloyds Banking Group's 10-year bond was bid 5bp wider than reoffer, while Credit Suisse (IOB: 0QP5.IL - news) 's 6NC5 and 11NC10 tranches were both bid a couple of basis points weaker.

Sumitomo Mitsui Financial Group and Societe Generale (Swiss: 519928.SW - news) 's 2027 bonds were also bid 7bp and 4bp wider than reoffer, respectively.

US banks are expected to hit the market after fourth quarter earnings, which kick off with JP Morgan and Wells Fargo (Swiss: WFC-USD.SW - news) on January 13.

Citigroup (NYSE: C - news) got ahead of its earnings on Wednesday with a US$5.25bn deal.

That deal's three-year tranches were wrapped around reoffer on Friday, while its fixed-to-float 11NC10 trade was around 11bp tighter.

This comes as the broader markets softened a touch on Friday amid mixed employment data in the US.

The country added 156,000 jobs last month. While that was less than the 204,000 seen in November, data showed wages had risen.

The CDX IG 27 index was 0.6bp wider at 64.5bp on Friday, according to Tradeweb, while US stock indices also inched lower.

Overall tone for the asset class, however, remains positive following healthy inflows this week.

Lipper reported that US$2.186bn entered investment-grade funds for the week ended January 4, marking the largest inflows since the first week of December. (Reporting by Will Caiger-Smith; Editing by Paul Kilby and Shankar Ramakrishnan)