Will the uncertainty of the new administration and expected interest rate hikes spell an active 2017 for the US investment grade bond market?
January 30, 2017
Update: Microsoft priced a $17bn investment grade bond after market close on January 30, 2017, making it the world’s largest bond issued so far this year. January 2017 volume for US marketed IG bonds is the second largest month on record with $162bn through January 30th, following May 2016 with $179bn.
The US investment grade bond market is off to a quick start in 2017, seeing a record $140bn+ in issuance so far this year according to Dealogic. That’s 9% higher than the previous record set in 2016.
Several large bonds have priced – Broadcom’s $13.6bn transaction on January 11th is the largest so far this year, and Microsoft is expected to price an investment grade issue overnight that could overtake Broadcom as the largest 2017 US transaction. If it prices above $13bn, it would become Microsoft’s second largest issue on record, following its $19.7bn offering five months earlier in August 2016.
Fixed Income specialist Brendan McGann expects the US investment grade bond market to remain active in the early part of this year. The record market momentum caused by the unchanged rates of 2016 should continue into early 2017, as corporates look to get ahead of further rate hikes and the uncertainty of the new administration by pricing bonds before it becomes more expensive to take on debt.