It was another week of waiting for Washington, and there was little movement in time to help credit markets along. It’s not that spreads were especially weak – a few basis points wider until Thursday, and the street seemed happy to engage in any activity that came along. In other words, odd lots traded well. But the new issue calendar was extremely quiet for the second week in a row, and secondary markets seemed to slow to a crawl. Thursday was a little better – word of a potential compromise late in the day helped to push spreads tighter, the rally pretty much in line with equities. But by that time, most new issuers had gone home for the week, ready to take off for a long holiday weekend. Yes, equity friends, the bond markets are closed on Monday in recognition of Columbus Day.
So here’s the recap. There was about $12 billion in Investment Grade supply for the week, with large deals from Sinopec (a Chinese oil refiner), Centrica PLC (the parent company of British Gas), Codelco (copper mining), and our U.S. domestic entry for the week, Berkshire Hathaway. The dominance of foreign issuers was notable – we will assume it is due to earnings season and not because U.S. issuers are busy searching for a more stable political climate to call home.
We are expecting another $10-15 billion in supply next week, but the banks are a bit of a wild card. As we start to move through earnings, we might see some of them hit the market, pushing that supply number higher. A lot will be contingent on progress in Washington – which is starting to feel like waiting for Godot.