Week sees record issuance of investment-grade bonds; S&P says 2012 issuance highest since 2009

By Aleesia Forni and Andrea Heisinger

New York, Jan. 11 - There were no new bond sales in the high-grade market on Friday, ending a record week that saw more than of $40 billion of issuance, sources said.

The $41.6 billion of new bonds priced was the "largest week [of high-grade sales] on record," a market source said, and blew the $20 billion to $30 billion predictions for the week out of the water.

The coming week is set to be fairly active, but "not like this week," the source said. "We're looking at $20 billion."

A syndicate source said that there should be a mix of sectors looking to price bonds in the coming week, including more financial names.

Several of the large banks such as JPMorgan Chase & Co. are set to announce earnings in the coming week and could jump into the bond market afterward.

"BofA came this week and had something like $17 billion in demand, so we shall see," the market source said. She was referring to the $6 billion sale in multiple tranches from Bank of America Corp. on Jan. 8.

A new report from Standard & Poor's Ratings Services said that overall corporate bond issuance in 2012 topped $3 trillion, which was the highest amount since 2009 when $3.3 trillion of bonds were sold worldwide. Of that amount, $1.7 trillion came from the investment-grade bond market.

Another report out by S&P said that composite spreads of high-grade bonds tightened 2 basis points to 177 bps, which is below the one-year moving average of 202 bps and five-year average of 246 bps. Bonds with AA spreads narrowed 1 bp to 120 bps while those with ratings of A and BBB each tightened 2 bps to149 bps and 211 bps, respectively.

The secondary market also saw a "typical Friday," with one source commenting there was "not much activity to speak of."

Later in the session, another trader commented that he had seen some widening of spreads as the day wore on.

Among those names, the trader saw Ford Motor Credit Co. LLC's $1.25 billion of 2.375% five-year notes 4 bps weaker during the session at 171 bps bid, 167 bps offered.

The Dearborn, Mich.-based financing arm of automaker Ford Motor Co. sold the notes to yield Treasuries plus 168 bps on Tuesday.

S&P breaks down 2012 issuance

The report from S&P broke down issuance by sector and region as well as tracking how yields and spreads declined.

Investment-grade new issuance comprised 44% of the total $157 billion that came to market globally in December, according to the report.

There was $468 billion of financial issuance of investment-grade bonds from issuers in Europe in 2012 and $299 billion of non-financial issuance, with $258 billion from financial names in the United States and $417 billion from non-financial high-grade names.

The U.S. investment-grade spread was 184 bps at the end of 2012, compared with 188 bps in November and 224 bps at the beginning of the year, according to the report.

Yields for corporate bonds also remained low throughout 2012. For instance, the 10-year yield for the U.S. industrials rated AA by S&P declined to 2.8% as of Dec. 31 from 3.1% at the beginning of the year.

Option-adjusted bond spreads for U.S. high-grade corporate names declined to 184 bps as of Dec. 31from as high as 233 bps in June and 224 bps at the beginning of the year.

The CDX North American Investment-Grade index declined to 95 bps in December from 99 bps in November - well below the high of 127 bps reached in June.

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