NEW YORK--(BUSINESS WIRE)--The volume of 'AA' and 'A' rated corporate bonds in circulation is up 7% this year to $2.22 trillion from $2.08 trillion at year end, according to Fitch Ratings. The increase is mostly due to investment grade financial issuance which totaled $158 billion in the first half - the highest six month tally post crisis.
Stronger demand for commercial and consumer loans and the opportunity to refinance has boosted financial issuance this year. In fact, the universe of investment grade financial bonds has expanded 6% year to date to $1.33 billion, ahead of the 4% growth rate recorded across high grade industrials (to $2.53 trillion).
Pressure on the US corporate bond market's rating mix (in particular the surge in 'BBB' bonds versus shrinking top grades) stalled in the first half, mostly due to strong industrial and financial investment grade issuance and secondarily to balanced rating activity. Less than one percent of outstanding US corporate bonds were affected by upgrades or downgrades in either of the first two quarters of the year.
New corporate bond issuance totaled an astounding half a trillion dollars in the first half of the year with 75% consisting of investment-grade bonds ($379 billion).
Energy, healthcare and pharmaceuticals, and computers and electronics led industrial activity. While the three are large sectors (9%, 8% and 6% of market volume at mid-year), their issuance activity topped even their market positions with energy comprising 10%, healthcare 11%, and computers 8% of first-half bond sales.
The average coupon of fixed-rate US industrial bonds was 5.4% at the end of the June, down from 5.5% at the end of March and 5.7% a year ago. Across financial issues, the average coupon was 4.7% versus 4.8% in March and 5.1% a year ago. There is still a marginal benefit to refinancing but it is becoming less pronounced.
For additional information, please see our report titled, "U.S. Corporate Bond Market Monitor, 'AA' and 'A' Bonds Resurface," which is available on our website www.fitchratings.com.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
Applicable Criteria and Related Research: U.S. Corporate Bond Market
Monitor ('AA' and 'A' Bonds Resurface)