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Weekly Supply & Flows Update

In the week following the attack on the World Trade Center and the Pentagon, the SEC relaxed rules allowing companies to buy back their equity. As a result, most of the capital markets activity has been short-dated debt by higher-rated entities looking to take advantage of the massive steepening of the yield curve to fund stock buybacks. First out of the shoots was a two-tranche bought deal from A2/A Disney. The 2-year and 3-year offerings (each $500 million) priced with eye-catching coupons of 3.9% and 4.5%, respectively. GE Capital also came to market with a $2 billion 1-year floater. We expect to see this trend continue near-term. Overall, the average weighted maturity of debt issued was under 5 years for the first time this year and weighted average credit quality remained at AA/AA-.

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