Primary market volumes remained depressed this week with just $3 billion of investment grade issuance coming to market but there were some notable developments. On a macro level the rally in Treasury yields that followed from the Fed moving its bias of risks towards weakness has taken yields to historic lows. This has raised the question of whether we will see a surge in opportunistic funding from yield-sensitive issuers who seek to capture very appealing levels at which to lock in long term funding. We have seen evidence of this phenomenon each time yields have hit new long term lows and it is likely we will see further evidence of it when the primary market picks up speed in September, post the summer hiatus, when we expect volume to pick up from current depressed levels. The second notable event of the primary market this week was the resumption of telecom issuance as SBC Communications brought $1 billion of 10-years to market at a spread of + 200 bp. The deal was reassuring in that it was placed successfully even in the week when the company had its Aa3 rating place on negative credit watch by Moody's, reinforcing that investors recognized the problems that have plagued credits such as WorldCom and Qwest can be isolated despite the challenges that the industry as a whole faces.
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