The supply pipeline seems to be finally winding down recently, but volumes have continued be surprisingly robust and the market has resisted the temptation to close the books early on what has been a most difficult year. Investment-grade issuance for December has now hit our full month expectation, totaling $27 billion. However, it has been in the high-yield arena that the recent months have contrasted most strongly with the dearth of deals that came to market in Q3. There was a full $5 billion of high-yield issuance in the latest week, nearly equaling the $5.6 billion of investment-grade deals. This is a notable change from November when there was a strong dominance of supra, sovereign and other highly rated deals and indicates just how much of a rebound there has been in risk appetite. This can be seen in our moving average of the weighted average rating of deals issued, which has now dropped to the lowest level we have seen in 2002. With the holidays now upon us, volumes are likely to be depressed to year-end. And although the healthy state of the primary market in November and December augurs well for the New Year, the potential for escalation of the conflict with Iraq is sure to prove disruptive to markets and likely to cause another of the sudden drops in debt issuance that were seen frequently in 2002.
Analysis by CreditSights, Inc., an independent online credit research platform. Call (212) 340-3888 or visit www.CreditSights.com for more information.