Panasonic: The Video Co. That Could Kill The Corporate Bond Lull

Meanwhile, Panasonic’s suspected deal emerges amid a general dry spell in U.S. dollar, high-grade corporate debt transactions.

Issuance volume is likely to remain low this week, as U.S. financial markets are set to close at 2:00 pm ET Wednesday – and remain closed all day Thursday – in observance of the Independence Day holiday. Also, earnings season is set to spur blackouts in July, keeping the primary market humming at a relatively slow pace.

Ron Quigley, head of fixed income syndicate at Mischler Financial, also pointed out that the month of July ends with the Federal Reserve’s Open Market Committee rate decision, which should keep many issuers and investors on the sidelines.

Quigley highlighted that over the last three years, the month of July has averaged roughly US$94.4bn in investment-grade corporate-only issuance, placing expectations for July 2019 on the “lighter” side — about US$20.3bn less volume or 21.54% lower.

Syndicate managers generally think total corporate bond issuance in July may amount to anywhere between US$70bn and US$75bn after an estimated US$80.3bn priced in June.

Quigley added that potential offerings in the pipeline include deals from FS KKR Capital Corp (NYSE: FSK), as well as South Korea’s Shinhan Financial Group (NYSE: SHG) and Korea Gas (KRX: 036460).

Demand remains intact

Against this backdrop, Panasonic’s potential bond sale should meet with decent interest, as high-grade corporate debt continues to attract global demand for the yield offered in the primary market – especially among those bond buyers who have been priced out of their local markets or have a dearth of available paper.

The yields on 10-year Japanese and German government bonds, for example, were last bid in the areas of –0.155% and -0.360%, respectively.

Fund flows also continue to swell.

For the week ended June 26, Thomson Reuters/Lipper U.S. Fund Flows reported a net inflow of roughly US$3.24bn into investment-grade corporate bond funds, while high yield funds posted net inflows of roughly US$1.46bn.

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The author does not hold any positions in the financial instruments referenced in the materials ...

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