(Bloomberg) -- Investors have welcomed an abundance of issuance in the blue-chip primary debt market this week, with many of the deals that debuted on a record-setting Tuesday already trading tighter the next day.
Over $43 billion of new high-grade bonds sold on Tuesday, the third-busiest day on record. Spreads on most of those bonds tightened in the secondary market on Wednesday, according to data from Trace. One of them, the biggest chunk of Mastercard Inc.’s $3 billion deal, traded 11 basis points tighter.
A further $29 billion of investment-grade notes priced Wednesday.
Investors are locking in rates while they’re still relatively high in anticipation of an anticipated interest-rate cut this month by the Federal Reserve. Policy easing could send average high-grade bond yields, which were at 4.89% on Tuesday after falling for months, lower still.
For now, the sheer number of new issues requires some time for investors to analyze and the market to fully digest. Some are still waiting on allocations and looking at where prices settle in secondary-market trading before making decisions on whether to top up positions, said Nicholas Elfner, co-head of research at Breckinridge Capital Advisors.
“There’s a certain amount of work and movement,” he said. “It’s not necessarily seamless. So if you’re going to do it, you want to see some performance in the secondary market.”
It’s not unusual for some tranches to trade a bit wider after deal-deluge days, Elfner said. There can also be a dampening effect on secondary trading outside of fresh bonds as investors try to get exposure to new issuance, he added.
--With assistance from Michael Gambale.
(Adds Wednesday’s issuance amount in the third paragraph. An earlier version of this story corrected John Deere Capital’s bond move.)
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