Next Week Set to Be Most Active Period for High-Grade Issuance in December
Several major high-grade issuances are scheduled for the next week, and the activity will be the most significant since the middle of November, according to Credit Suisse’s latest global issuance report. This year’s high-grade issuance has been the highest of the last decade, and the Tax-exempt municipal sector has performed particularly well. However, the Financial-sector issuance has been relatively modest, accounting for less than 30 percent of total issuance.
Fund flows turned positive after 14 weeks of outflows
Despite a run of four weeks of outflows for high-grade issuance in December, fixed-income ETF flows turned positive for the first time in fourteen weeks. The week ended with a net inflow of $33.4 billion, exceeding the previous four months’ combined inflows.
Investors flocked to a range of bond and fixed-income ETFs as portfolios of stocks sank into the gutter. The most common category to experience a weekly outflow was iShares: Short Treasury Bond ETF. Other category outflows included the Invesco Russell 1000 Dynamic Multifactor (OMFL), the JPMorgan: BetaBuilders Europe (BBEU) and the Invesco QQQ Trust 1.
Aside from bonds, the largest category to experience outflows was sector stock ETFs. The sector-healthcare/biotech, financial and technology categories all recorded outflows of more than $1 billion.
Financial-sector issuance accounted for less than 30% of the year’s total
Providing insurance, credit and loans is a major business sector spanning a wide variety of companies from real estate investment trusts to banks. The financial sector is not without its shortcomings though. From a regulatory standpoint, the financial industry is far from the most transparent in the nation. But, it also serves as a hub of innovation, as well as a conduit for many of the nation’s most important aquifiers.
The financial sector is an important part of our economic engine, and it is the best place to start if you are interested in improving your bottom line. Moreover, the sector is also the best place to start if you are looking to improve your personal savings. It is a good idea to put aside at least 5% of your savings annually for a rainy day fund. The best way to do this is by setting up a diversified savings plan. This way, you are protected from the whims of the stock market, while also saving yourself from a major financial crisis.
Nashville Airport Authority issued $602 million airport revenue bonds
Earlier this month, the Metropolitan Nashville Airport Authority issued $602 million airport revenue bonds in the secondary market. The bonds received a positive response. The bonds will be used to pay for capital projects at the airport. The revenue bonds are secured by net revenues generated through airport operations. Approximately one-third of the bonds are senior debt and one-third are subordinate debt. The bonds will mature in 2052.
The airport has a new master plan that is being implemented to prepare the airport for the post-pandemic world. A key component of the plan is the issuance of nearly $3 billion in airport capital improvements. The plan will include projects designed to meet the objectives of the 2020-2024 Capital Plan.
The Airport’s current $180 million capital improvement program includes 63 million in terminal improvements and $48 million in airfield improvements. It also includes ten automobile charging stations on the third floor of the South Parking Garage.
Tax-exempt municipal performance has been extraordinary
During December, the tax-exempt municipal bond market was the best performer on Wall Street. This has been due in part to the strong performance of muni CEFs and tax-free bonds. These funds have enjoyed a spirited year in 2011. The underlying growth outlook for the economy remains healthy, and interest rates remain low, making bond funds an attractive investment.
In addition, a strong underlying growth outlook should keep defaults low. In the long run, the economy should continue to grow, which should support interest rates. These rates should also remain low as long as the Fed maintains its accommodative policy. The rate hikes that have been planned should also continue to be gradual and limited.
The 30-year AAA bond yield closed at 3.59% on Friday, down 29 basis points from a week earlier. Meanwhile, the 10-year yield was down 26 basis points.
December 2021 high-grade corporate issuance was the highest of the last decade
Despite a relatively light week, the high-grade corporate market was the star of the show. With seven deals totaling $8.5 billion, the new issue market met its goals and exceeded expectations. The new issue market also received some high-end concessions, including a 7-bps reduction in yield and a 15-20 bps reduction in coupon. While the new issue market remains muted, it’s clear that high-grade corporate bonds are outperforming similar-duration Treasuries, with the investment grade bond yield a full 65 bps below its mid-October highs.
Despite the slew of new issues, the high-grade corporate market only closed out the year with a total of just $8 billion, down from its record high of $9 billion in December 2018. That said, high-grade corporate issuance was the largest monthly total for the last decade, with totals exceeding $40 billion each month in the last year.