Duration risk unlikely to dampen long bond issuance
By Shankar Ramakrishnan
NEW YORK, Sept 16 (IFR) - The yield on the 30-year Treasury jumped 24bp this week as investors fretted over a possible US rate hike and the perception that global central banks might change tack on monetary easing.
While this has left holders of long-term US Treasuries taking a hit, the move has done little to deter investors from putting money to work in long-term corporate bonds.
"Technicals are still supportive of long-end bond issuance and purchases," said one syndicate banker. "In fact, with more yield on offer now, we should see more investors putting money into 10 and 30-year bonds."
This appeal for long-end bonds was on full display this week, when issuers successfully placed over US$10bn of bonds with tenors of 10 years or more.
And while some struggled to tighten spread levels during bookbuilding, most borrowers enjoyed huge oversubscriptions and paid new issue concessions of just a few basis points.
One such borrower was Altria Group, one of the world's largest cigarette and tobacco companies.
On Tuesday, it raised US$2bn through 10 and 30-year bonds that were priced about 15bp-20bp tighter than initial price thoughts on the back of a US$6.7bn order book.
With an 11bp new issue concession, the 30-year may have come at a price, but interest in the trade amid concerns over tighter monetary conditions simply underscored the strength of demand for long-term corporate paper. Continuación...