The pace of new junk sales is likely to slow for the remainder of the year, agree strategists and economists. High-yield deals totaled $44.9 billion globally for the first four months of the year, representing 6.7% of outstanding market size, in the second-lowest relative volume for the period since 1996, according to data from Merrill Lynch.
Michael Taylor, high-yield strategist at Bear Stearns, expects U.S issuance to remain at a $20-25 billion clip per quarter for the remainder of the year, bringing the year's total in the range of $80-100 billion. The first quarter of last year saw around $37 billion in U.S. issuance alone, he noted.
John Lonski, chief economist at Moody's Investors Service, also expects volumes to remain below-trend for the remainder of the quarter. Though he said the recent pickup in bank loan and commercial paper debt, which is considered a leading indicator of future corporate bond issuance, suggests junk issuers are waiting in the wings. "Until uncertainties surrounding fallen angel downgrades of several large issuers are resolved, high-yield issuance will continue to be lower," he said, referring to volatility caused by General Motors and Ford Motor Co.'s potential descent to junk.
