U.S. Bond Sales to Come Roaring Back After Labor Day

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The investment-grade primary market will spring back to life next week following the U.S. Labor Day holiday, as borrowers look to issue debt with low coupons.

Syndicate desks expect $40 billion to $45 billion of fresh high-grade supply in the four days of trading, after just $3.75 billion priced this week with much of Wall Street on vacation. 

Companies will continue the aggressive borrowing seen through most of 2021, helped by the low-rate environment and driven by the necessity of funding a growing pipeline of M&A activity. For the month, $130 billion to $140 billion of supply is expected, according to an informal survey of debt underwriters. 

“With rates now going up we think issuers will see September as the last window to issue at these low coupons, which creates an incentive to continue to pull forward needs,” Hans Mikkelsen, Bank of America Corp.’s head of high-grade credit strategy, wrote in a report Thursday. 

Read More: High-Grade Borrowers to Rush Back Into Market After Labor Day

High Yield

Estimates for U.S. high-yield bond issuance in September range from $35 billion to $60 billion, according to six Wall Street banks surveyed by Bloomberg.

If the high end of projections is hit, that would far exceed the $47 billion issued in September of 2020, and make for the busiest month of this year, according to data compiled by Bloomberg.

Expect a busy high-yield bond and leveraged loan calendar through the fall as acquisition and buyout financing, along with refinancings, make their way through the market, said John McAuley, co-head of debt capital markets for North America at Citigroup Inc.

“This is the first year in a while where we’ve had good markets, a ton of committed pipeline ready to come out, as well as both a functioning bank loan and bond market,” he said. “A lot of new deals are coming in at the same time.”

McAuley doesn’t see this as just a temporary surge, but as the start of a busier market. “It’s going to be higher for longer on deal volumes,” he said.

In U.S. leveraged loans, bankers are now readying a blitz of M&A deals that will steadily increase as the month proceeds, with the buyout financing for Clearlake Capital Group’s purchase of software services company Cornerstone OnDemand likely to be among them.

September leveraged loan volume is expected in the range between $40 billion to $50 billion, according to three Wall Street banks.

Heading into the week, at least one loan meeting is scheduled, on Thursday after the Rosh Hashanah holiday. Canadian construction component manufacturer Arclin is offering $775 million of first-lien and $155 million of second-lien loans to fund the acquisition by The Jordan Co. 

While no loans have commitments due next week, Thrasio, a startup that rolls up popular brands sold on Amazon.com Inc.’s marketplace, is expected to finalize its allocation of $300 million of term loans.

©2021 Bloomberg L.P.

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