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The volumes for the investment grade US dollar corporates and financials market in 2023 through the month of August are shown in the graphic below.

The total for issuance in August was USD68.4bn. At the beginning of the month, syndicated banks expected around USD100bn of issuance, but by mid-month this estimate dropped to around USD85bn. Issuance this month thus was below expectations and this August is the lowest volume in August since 2015 (USD53.25bn).
There was a lull in the market in late August, as tends to happen at this time of year. There was only one issuer each coming to the market on 21, 22 and 23 August (Pricoa USD500m, Charles Schwab Corp USD2.35bn dual-tranche and Pacific Life USD600m respectively).
The running total for the year in the corporate/financial IG USD market is now USD841.78bn, with four months to go. We are ahead of 2022 (USD829.8bn up to the end of August 2022), a year which in the end saw a total of approximately USD1.2tn by the end of December. Syndicate staff are expecting USD120bn in September, which would easily exceed more than the USD78.14bn sold in September 2022 (according to Bond Rada data).

Spreads and yields
August saw, contradictory to July, a widening in spreads of the US investment grade market for corporates and financials, although only slightly. We started the month at curve plus 147bp (according to ICE BofAML data), and ended it a curve plus 152bp. Spread compressions from IPTs to launch have been commonplace and marked in August, even reaching a colossal 60bp in one case, according to sources familiar with the matter.
Yields on average in the US grade investment market hardly moved in August, with the month starting at around 5.89% and ending at just above 6.00%, down from its 21 August peak of 6.17%.
Credit sentiment in August was mixed, as a rise in interest rates in the middle of the month meant it was more expensive for companies to borrow. By mid-month (14 August) fixed income treasuries were mostly unchanged, with the 10-year yield at around 4.15%.
10-year inflation protected Treasury yield went beyond 2% for the first time since 2009 on Monday 21 August, however, according to Bloomberg, so it was also more expensive for the US government to enter this part of the debt market in the month.
At the beginning of August, as mentioned in our last wrap, US government credit was downgraded by Fitch. Much was made of the move by economists at the time, although no immediate effects have been discerned in the US investment grade bond market.

Corporates lead in August
The breakdown between corporates and financials for the year and the month of August is shown in the graphic below. Corporate issuance in August exceeded financials by over USD10bn. Financial issuance this month is among the lowest of the year so far at just USD28.8bn.


Corporates in August
Although ahead of financials, corporate issuance in August was light compared to previous Augusts (at USD39.96bn). In the graphic below we see the breakdown by sector. There were strong performances in the basic materials industries (USD12.18bn), utilities and power (USD9.89bn), manufacturing (USD8.48bn) and technology (5.58bn). Some sectors were absent in the market this month, namely infrastructure, media and telecoms, and transport and logistics.

Deal highlights for August
Apollo Global Management prices fixed-rate resettable junior subordinated notes
Apollo Global Management (APO) sold a USD600m 30NC5 issue in mid-August, its biggest deal ever recorded by Bond Radar. The fixed-rate resettable junior subordinated notes (due 15 September 2053, callable 15 September 2028) priced with a yield of 7.625%. The issuer does not come to the market particularly often, the last time being in June 2021. This issue was rated A3/BBB/BBB+ and the paper will be used to redeem outstanding Apollo preferred stock.

Columbia Pipeline issues largest corporate deal
American company Columbia Pipeline Group priced the largest corporate deal in August with a USD5.6bn (only slightly ahead of Oneok Partners USD5.25bn) seven-tranche deal of which two of the tranches were issued by the Holding Company, and the other five by the Operating Company. This is the company’s first time in the market since May 2015 when it issued a USD2.75bn 4-tranche deal.
Columbia split its offering into two forms of credit. Holdco and Opco. The HoldCo tranches were USD300m 3-year priced at T+150bp and USD700m 5-year priced at T+180bp. Ratings here were Baa2/BBB+ by Moody’s and Fitch.
The OpCo tranches were USD750m 7-year priced at T+175bp, USD1.5bn 10-year priced at T+195bp, USD600m 20-year priced at T+212.5bp, USD1.25bn 30-year priced at T+235bp, and USD500m 40-year priced at T+252bp. Ratings here were Baa1/BBB+ by Moody’s and Fitch.
The proceeds of the Columbia offering will allow TransCanada Pipelines (TC Energy) to monetise part of its ownership of Columbia by selling 40% of the latter to the private equity group Global Energy Partners. TC will continue to operate the pipeline systems. TC and Global Energy will act as partners on maintenance and growth capital expenditures going forward.

Goldman Sachs comes to US dollar market twice in one month
Investment banking group Goldman Sachs entered the USD market twice in August, with a USD2.75bn dual-tranche issue on 7 August, and a USD1.5bn PNC5 issue a week later. These mark its first time in the market in 2023.
The 7 August deal had a USD2.25bn 3NC2 fixed-rate tranche and a USD500m 3NC2 FRN tranche, both due on 10 August 2026. It was, as can be expected, solely led by Goldman Sachs.
The USD2.25bn 3NC2 priced at T+103bp and the USD400m 3NC2 FRN priced at SOFR+106.5bp. The issue was SEC registered, issued in senior unsecured format. The issue was rated A2/BBB+/A.
The 14 August issue, callable on 15 August 2028, at par with a coupon of 7.50%. The ratings were Ba1/BB+/BBB-, with the UOP stated as: UOP: “To redeem all outstanding shares of Series J Preferred Stock and any remainder of the net proceeds to provide additional funds for operations and for other general corporate purposes, which may include, but is not limited to, repurchases or redemptions of other outstanding shares of preferred stock.” Goldman Sachs was once again sole lead on this issue.

Allianz rounds off month with well received subordinated deal
The insurance giant Allianz rounderd off the month in the US investment grade market on 30 August by selling a USD1bn subordinated Tier 2 note with a tenor of 30 years (callable after 10). Ratings for the deal were A2/A+, versus the issuer’s senior ratings of Aa3/AA.
IPTs for the offering came in at 6.75% area and sources close to the deal noted the book steadily built from 1.6bn through USD2bn early in the session. Later the deal went straight to launch, at which point the book had risen to USD4.6bn. The terms at launch were a size of USD1bn and a yield of 6.35%, a 40bp tightening from IPTs. The sources put the final book at USD3.8bn.

Outlook
Bankers canvassed by Bond Radar say investment-grade bond sellers will come in large numbers to the market in September, with most expected in the four days following the US Labor Day holiday. We could see volumes of around USD120bn for September.
We can see from the graphic below that a number of USD120bn is not out of the ordinary for September in the US investment grade dollar market, indeed, perhaps a little low compared to the last five years (excluding the anomaly of last year). However, the range for 2013-2017 (not shown on the graphic) for September is USD98.8bn-USD132.23bn, of which USD120bn stands in the higher end.




Lead manager moves
The league table in US investment grade corporate and financials issuance is shown in the graphic below. This top ten list exactly mirrors the end of last month, with no bank changing positions. Mizuho, a recent entrant into the table after a long period among the next tier, retains its place in 08 position.