The high-yield primary market slowed to a crawl in July, as the $10 billion in issuance marked the lowest monthly volume total since December. The prior low in 2015 was $21.2 billion in June. Issuance in March, April, and May was $38 billion, $37.3 billion, and $35.6 billion, respectively.
July’s volume is 68% below the monthly average of $30.95 billion for the first six months of the year, LCD data show. Moreover, volume in 2015 through July is 5% behind last year’s pace, at $195.7 billion versus $205.7 billion. Prior to July, volume had been running ahead of the pace for 2014.
While June’s slowdown was precipitated by rate volatility, reluctance among issuers in July was tied to commodities volatility, China’s stock market shocks, and early in the month, fears of a default in Greece. There was no new issuance in the week that ended July 10, the first zero-volume week since July 2013, excluding the late August and December holiday weeks.
As with June, time-sensitive M&A and LBO issuance represented a greater proportion of total volume, at 55% for the month, as opportunistic issuers held back to represent just 36% of issuance, the lowest percentage all year. The yield-to-worst on the S&P U.S. Issued High-Yield Index finished the month wider at 6.59%, from of 6.38% on July 1. The option-adjusted spread edged up to T+511, from T+480 at the start of the month. - Joy Ferguson
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