Bangkok--16 Apr--Standard & Poor's
Despite a rocky February, the speculative-grade corporate bond market finished the first quarter of 2010 on a positive note due to a strong performance in March, said an article published today by Standard & Poor's.
The spread on Standard & Poor's speculative-grade bond index tightened 74 basis points (bps) in March, and new issuance jumped to $30 billion from $12.6 billion in February and $1.7 billion in March 2009, according to the article, titled "U.S. Speculative-Grade Bond Indices Review: Refinancing Concerns Are Easing (Premium)."
"For the entire quarter, Standard & Poor's speculative-grade bond index tightened 29 bps to 574 bps, and U.S. speculative-grade corporate bond issuance totaled $55 billion," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.
High-yield bond spreads widened in late January and early February as investors became a bit more risk averse. Issuers canceled a handful of new deals in late January as market conditions for new issues weakened. However, headwinds, such as the debt problems in Greece, could not keep the market down long.
"Fairly strong reports on manufacturing, employment, and retail sales, among others, over the past month provided investors with some signs that the recovery is progressing," said Ms. Vazza. "Slowing defaults and stabilizing credit quality in most speculative-grade sectors are giving a boost to investor optimism."
We believe that fundamentals within the speculative-grade segment are improving, though we expect many sectors to rebound very slowly. The strong primary market is also a positive sign, in our opinion. Based on our view of economic, financial market, and company fundamentals, we believe that high-yield bond spreads could continue to tighten moderately in 2010.
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