Early August investment-grade supply heavy; M&A-related funding thins

By Cristal Cody

Tupelo, Miss., Aug. 5 – Deal volume roared back to life with the first week of August posting more than $58 billion of investment-grade bond issuance.

The pace outstripped forecasts for the week and nearly eclipsed supply anticipation for the entire month.

High-grade issuers priced nearly all of the month’s forecast this week.

Issuers were anticipated by market participants to bring about $75 billion of supply in August following nearly $90 billion of issuance in July and about $70 billion of volume in June.

The first week of the month was expected to kick off with about $25 billion of issuance.

The week saw blockbuster volume from investment-grade issuers including Apple Inc., Colgate-Palmolive Co., UBS Group AG, Barclays plc, Intel Corp., HSBC Holdings plc and Meta Platforms Inc.

Almost all of the week’s deals were brought with proceeds slated for general corporate purposes with social media operator Meta and Canadian National Railway Co. noting that proceeds could be used for acquisitions.

Meta, formerly known as Facebook, priced $10 billion of senior notes (A1/AA-) in four tranches on Thursday in its first credit offering.

Canadian National brought a $1.5 billion two-part offering of senior notes (A2/A) on Tuesday.

M&A supply lower in July

While August volume got off to a roaring start, overall gross issuance declined $124 billion, or 13.1%, over the first seven months compared to last year, according to a BofA Securities Inc. note this week.

North American mergers-and-acquisitions-related announcements fell in July to $106 billion, the lowest level since May 2020, from $182 billion in June, BofA Securities said.

July high-grade bond supply from M&A-related transactions softened slightly to $7.5 billion from $7.9 billion in June.

Some deals with high-grade funding potential expected this year include an offering still on the calendar from Oracle Corp. following the company closing in June on its $28.3 billion acquisition of Cerner Corp., according to market sources.

JetBlue Airways Corp. is the latest to join the potential bond pipeline following its announcement last week that it will acquire Spirit Airlines, Inc. for $3.8 billion in a transaction expected to close in 2024, a source said.

Active deal pace

While a chunk of pent-up supply was cleared from the pipeline at the start of August, investment-grade primary action is expected to stay strong in the week ahead following the upbeat jobs report Friday, a source said.

The Labor Department announced that total nonfarm employment rose by 528,000 in July, beating market forecasts of a 250,000 increase.

The unemployment rate declined to 3.5% in July from 3.6% in June.

About $25 billion of notes are eyed to print next week with issuance likely front-loaded ahead of the midweek release of July inflation economic data, sources said.

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