Occasioned by spike in cost to sell debt

All four companies seeking to sell fresh debt in the United States (US) investment-grade primary market yesterday (September 19), stood down as issuers face increasing borrowing costs and negative market sentiment.

With US indices opening in the red and markets being closed in both the United Kingdom (UK) and Japan, Syndicate desks on the street anticipated most issuers to pass on issuing said debt.

With the Federal Reserve meeting tomorrow and lower expected issuance today and Thursday, the estimated US$15 billion to US$20 billion in fresh bond sales for this week may prove challenging to reach.

Market watchers say the market has been negative and businesses continue to delay scheduled bond sales to avoid the increased volatility brought on by August’s inflation statistics.

HIGHEST LEVEL IN 11 YEARS

Last week, sales performance was poor with only 29 per cent of the new issuances trading tighter in the secondary market.

As finance costs continue to rise and the yield on the 10-year Treasury reached its highest level in 11 years yesterday, businesses wishing to raise capital in the US primary market will have to prepare to pay extra for any debt raised.

This hawkish stance by the Fed in the face of inflation has led to one of the most expensive periods in the main market in more than a decade.