markets

Credit Market Can't Catch a Break as Headlines Smother Momentum

One step forward, two steps back. That’s the theme of the corporate bond market these days as negative headlines stifle any momentum generated from strong deals.

This week a familiar story unfolded in the credit market. Traders gobbled up General Mills Inc.’s $6 billion of bonds, spurring investors to hope that the deal could rescue high-grade bonds battered by big swings in stocks and rates. There would be no such luck as concerns about a possible trade war between the U.S. and China crushed the positive move.

That marked the third time strength in the market generated by the three biggest sales of the year was stymied by broader events.

Deal / Size OrdersEvent After PricingSnowstorm?
CVS $40 billion $120 billionCohn Resigns Yes
BUD $10 billion$36 billionFOMC DecisionYes
GIS $6.05 billion$37 billion China RetaliatesNo

The same thing happened in early March amid a sputtering credit market that had seen spreads to Treasuries widen over the prior month. Traders saw the $40 billion CVS Health Corp. deal as a lifeline. The sale was well received, attracting more than $120 billion in orders and tightening 15 basis points post pricing. Then the news broke of the resignation of White House economic adviser Gary Cohn at the same time a winter storm battered the Northeast, stifling momentum.

And that wasn’t the only time bad weather helped stall the market. A nor’easter pounded the East Coast as Anheuser-Busch InBev SA/NV sold $10 billion of bonds. The deal did well but the energy it generated soon faded amid the first rumblings of tariffs against China and headlines from the Federal Reserve meeting.

So what will it take to sustain momentum in what Bank of America analysts call the “yo-yo market”? A break.

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