The Record Volumes and Big Deals Reshaping the Credit Markets

Market Volume and Activity Levels

• Average monthly investment grade syndicate volume for 2018–2019 was approximately $100 billion.
• March 2020 saw $265 billion priced out, representing the largest single-month volume on record.
• The week immediately preceding the March 23 Federal Reserve announcements generated over $60 billion in supply, driven by high-quality names like Intel.
• The first week following the Fed's major announcements saw $110 billion of supply, followed by $118 billion the subsequent week, marking the busiest two-week stretch in market history.
• In the sub-investment grade market, significant volumes culminated in an $8 billion financing for Ford last Friday, contributing to $15 billion priced out last week.
• Significant refinancing activity is anticipated for May, targeting debt maturing within the next 12 to 36 months and drawn portions of revolving credit facilities.

Market Composition and Borrower Evolution

• Initial post-announcement supply was predominantly single-A and better corporates.
• Subsequent weeks saw expansion to include financial institutions and a growing share of triple-B borrowers.
• The April 9 Fed program expansion created significant bidding in the high-yield market by allowing "Fallen Angels" (credits initially rated investment grade as of March 23) access to credit facilities.
• The secondary market corporate credit facility was authorized to purchase high-yield exchange-traded funds (ETFs).

Federal Reserve Policy and Future Outlook

• Current primary and secondary market corporate credit facilities are not yet fully operable, prompting expectations for further tweaks and clarifications regarding their execution.
• The Fed is unlikely to unveil further facilities absent a material change in financing conditions, which currently remain favorable.
• The Fed's actions are viewed as backstops rather than direct drivers of ongoing market mechanics at this specific moment.

Corporate Balance Sheet Strategies

• Corporate America entered the crisis with strong balance sheets, having utilized 2019 to extend duration and reduce reliance on short-term credit.
• Companies are actively layering liquidity by raising long-duration term debt to position excess cash on their balance sheets.
• Firms are capitalizing on access to the best debt financing levels seen since the global financial crisis, specifically the top decile.
• Borrowers are issuing commercial paper and resetting bank capacity for future use.

Demand Side and Investor Flows

• Demand has broadened from narrow initial digestion of Fed backstops to include high-yield focused accounts moving into investment-grade markets.
• Traditional investment-grade investors are seeing inflows pick up, with last week marking the sixth biggest weekly inflow into investment-grade bond funds.
• Money managers are actively marketing current investment-grade opportunities to end clients.
• The market expects an influx of cash from the typical investment-grade investor base in the coming weeks.
• Johnny expects demand to continue expanding to meet the anticipated "onslaught of supply" in May.