Money poured into investment-grade corporate bond funds earlier this year as investors took a flight to safety as the coronavirus spread and the market was backstopped by the Federal Reserve.  In turn, investment-grade bond issuance surged in 2Q20 as funding was readily available for companies that sought to raise cash to help ride out the economic storm caused by the pandemic.

This tidal wave of deal flow pushed investment-grade corporate bond issuance by US issuers to USD 823bn through July, already topping the previous full-year record of USD 752bn set in 2017. The months of March through June were the drivers of activity, accounting for a combined USD 672bn. The pace eased more recently in July, with issuance slipping to USD 33bn.

There has been a similar boom in high yield bond deal flow in recent months, with issuance soaring to USD 151bn in 2Q20 and June posting a record month of volume, although deal flow eased back in July. On a year-to-date basis, high yield bond issuance is at USD 251bn, already not too far off an annual record.

Though both segments have boomed, the smaller high yield market has seen its share of the combined activity climb in recent months after plummeting in March, reaching a 38% market share in June and 43% in July. High yield was also off to a strong start on the first business day of August, with more than USD 7bn from 10 deals in the market and more expected to come this week.

In terms of performance, the investment-grade market has easily outperformed the high yield market on a total return basis, gaining 8.1% year-to-date versus a loss of 0.23% for high yield, according to ICE/BofA.

Colm (C.J.) Doherty Global Head of Primary Market Analysis Debtwire

Colm Doherty is Debtwire’s Global Head of Primary Market Analysis. He is responsible for leading the production of primary market analysis and reports focused on the leveraged loan and high yield bond markets. Prior to joining Debtwire, Colm was Director of Analysis at Thomson Reuters LPC covering leveraged loans, CLOs and high yield bonds.

Colm has a B.A. in Economics & Legal Science from National University of Ireland Galway and an MSc. in Accounting & Finance from Ulster University.