After snoozing through the last few weeks of summer, it was time to get back to business, and the Corporate Bond market wasted no time in going to the head of the class. Investment Grade supply over the past week was huge, with $45 billion in new issuance (and well over $50 billion if you included all the sovereign issuers). Over 70% of the deals were in the bank and finance space. Bank of Tokyo – Mitsubishi UFJ and its partially-owned stepchild Morgan Stanley were among the two largest issuers, bringing about $3 billion, and $2.25 billion, respectively. There were also big deals out of Bank of New York, Wells Fargo, Lloyds Bank, Standard Chartered… even little Fifth Third Bank of Cincinnati did an $850 million bank note deal.

As a result of the heavy supply, the secondary market was forced to absorb a fair amount of paper, and this pushed spreads a little wider, especially in the Bank / Finance space, which saw about 3-4 basis points of widening on the week. Not a huge change, but enough to put spreads at the wide end of the very narrow, 5-10 basis points range where they’ve been stuck for most of the summer.

In all the excitement, we almost forgot JPMorgan. JPM issued $3 billion of subordinated holding company debt to start the week. This was a 10 year deal, priced at a spread of +153 (and has traded wider by a few basis points). Even though the FDIC Single Point of Entry (SPOE) rules for a bank holding company debt requirement remain under consideration, we have seen continued supply of bonds which we think might fill some gaps in this area. Depending on how the rules turn out. Which we don’t know yet. Did we miss something while on summer vacation? Banks are not usually big third quarter issuers; it is almost as though they have seen the answers to the test.

So, class, what do you think? Are bank issuers trying to fill their SPOE buckets before the rest of us even know where our new lockers are?

Good answer. Good answer. I like the way you think. I’m gonna be watching you.