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October 2019

New Issue Investment Grade Credit: Coming off a record $158 billion, September closed as the 3rd largest issuance month on record.

Despite a massive September, the first two and a half weeks of October saw weekly new issue volumes that were well below consensus estimates.  As we emerged from the bulk of earnings season and blackout periods the calendar gained steam and issuance picked up considerably, closing the month at $68.6 billion. Year to date $992.2 billion has priced, trailing 2018 by -6.1%.  

One of the big highlights of the month was AmeriVet Securities Junior Co-Manager on 3-part Citi transaction (Citi 11NC10 & 3NC2 FXD, 3NC2 FRN) and part of the selling group for JPMorgan 4.75% $25 par Preferred stock.

 September Supply Run Rate

IG (ex-SSA)



Run Rate









September Supply Breakdown

IG (ex-SSA)







$551.1b (56%)




$369.2b (37%)




$71.9b (7%)




$992.2b (-6%)

Source: Bloomberg

IG Credit spreads for the month of October closed +4-8 basis points tighter after a lighter than expected October new issue supply and wall of cash chasing US Credit assets.  The global negative yield story has buyers flocking to the markets looking for yield in both Sovereign and IG credit debt.  Credit indices for the month of October are at the tight ranges of the year further illustrating the move in credit spreads. The CDX Investment Grade Index closed the month at 53.16 just off the year to date low of 49.9 on 7/24/19. The CDX investment Grade Index began the year 1/1/19 at 90.6 after a 1-year high level of 95.6 on 12/24/18. (Chart above)

The Bloomberg Barclays US Agg Avg OAS is closing out the month at +110 just off the year to date and month to date tights of +106 after starting the year at the highs of 1.57 also illustrating the massive grind tighter in US credit year to date. (Chart below)

IG credit flows for the month of October paint a very similar picture to September with total volumes for October at $327.1 billion vs September at $303.8 billion. Demand for credit continued in October and Net Client Buying came in at $3.8 billion (September was $3.3 billion net) and couple that with a slow October new issue calendar which helped push spreads tighter for the month. The bulk of net client buying sits in the 3-7-year part of the curve ($2.35 billion) as well as the 7-12-year part of the curve ($1.78 billion) with the Financials sector making up 81% of the bulk of Net buying. (See IG Credit Flow chart below)

Investment Grade Credit closed October with record volume in secondary trading, lighter than expected new issue calendar, Credit Indices trading at or close to year to date tights and continued investor demand for US investment Grade paper. As we open the month of November projections for New Issues are calling for $95 billion in supply and this week $25-30 billion is expected to price. We will keep a close eye on, credit spreads, net client demand numbers, New Issue activity, secondary volumes as well as the direction of Credit Indices to see if they are signaling a shift in sentiment.