Morning Commentary: High-grade market quiet; light deal volume eyed first week of July

By Cristal Cody

Tupelo, Miss., July 1 – Investment-grade market action stayed quiet as July kicked off with little primary action expected over the holiday week.

The market opened with a strong risk-on tone thanks to the G20 summit in Osaka, Japan, where U.S. president Donald Trump and China’s president Xi Jinping restarted trade talks, a source said.

Anywhere from zero to up to $5 billion of supply is forecast with issuance likely to be limited to the first two sessions of the week, syndicate sources said.

The U.S. bond markets will close early at 2 p.m. ET on Wednesday and remain closed on Thursday for the Independence Day holiday.

Last week, more than $10 billion of corporate bonds priced.

June saw just under $83 billion of issuance, while July volume is targeted to total in the $75 billion to $80 billion area.

Issuance in the first half of the month is expected to be subdued due to the holiday and earnings blackout reporting periods, sources report.

The major U.S. banks will release second-quarter earnings results in mid-July, beginning with Citigroup Inc. on July 15 and concluding with Bank of America Corp. on July 17.

With the Fourth of July holiday and U.S. companies in the second-quarter earnings-related blackout periods, “the window for busy issuance this summer is effectively the five weeks between July 15 and Aug. 15,” according to a Bank of America research note released on Monday.

“In terms of financials, the pace of bank issuance for TLAC purposes has slowed substantially to mostly rolling maturities at this point,” the note said. “Hence we expect relatively light issuance following bank earnings reports this July.”

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