Bonds Blasted by Corporate Issuance as Market Says Farewell to Summer
Bonds Blasted by Corporate Issuance as Market Says Farewell to Summer
Abstract
General central bank anxiety is likely in play as the new week begins. The European Central Bank expected to hike 75bps on Thursday. We have the Bank of Canada tomorrow and the Bank of England next week, not to mention Australia's central bank hiking 50bps overnight. Perhaps the biggest central bank anxiety surrounds the Fed, which will meet in exactly 2 weeks after having a chance to digest another decent jobs report and a to-be-revealed CPI next week (incidentally, right before a communications blackout period-much like the lead up to the June meeting when the market experienced its sharpest rate spike of the year to the weakest levels in more than a decade. Adding immensely to all of the above is another seasonal occurrence: heavy corporate bond issuance in the first week of September. Corporate issuance matters for day to day rate volatility for two key reasons: With all of that in mind, the new week is beginning with an absolute deluge of corporate deals. That's a lot of underwriting to request of bond buyers on the same week they're dealing with new reinvestment caps on Treasuries and MBS, effectively eliminating reinvestments as of 9/1/22.