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Bond Issuance In April 2013

First quarter of 2013 witnessed a massive amount of debt issuance and the trend continued in April 2013. Issuers are taking advantage of low funding costs and massive liquidity injected into system by the central banks. Record low rates are forcing the portfolio managers to add high yield bonds to the portfolios. The asset managers are no longer worried about the tail risk as all the major economies have indicated that they will support their economies by keeping the rates low till they don't see signs of improvement. Total international bond issuance in April 2013 stood at USD353.1 billion. There were 1002 issuances during the month. Deutsche Bank was the top underwriter with 9.5% market share, underwriting USD33.5 billion of bond issuance. JP Morgan and HSBC Bank Plc took the next two spot with 7.0% and 6.7% respectively, underwriting USD24.8.0 billion and USD23.6 billion respectively.

The corporation world over are using the opportunity to reduce their interest costs and improve their maturity. Corporate globally raised USD341.6 billion by issuing bonds in April 2013. Asset managers are now keen to add more risk in order to improve portfolio yield. Deutsche Bank earned the top spot among corporate bond underwriters, underwriting 124 issues totalling USD 25.7 billion. JP Morgan and Goldman Sachs earned second and third spot, underwriting USD 22.2 billion and USD 20.8 billion respectively. Morgan Stanley, however, was underwriter for highest number of issuances at 250 even though the amount underwritten was lower at USD 19.1 bn. The largest corporate bond issuance was done by Apple at USD17.0 billion on 30 April 2013. Next spot was taken by Wal-mart Stores by issuing USD5.0 billion worth of bonds on 4 April 2013. The largest financial bond issuance was done by Morgan Stanley at USD3.5 billion on 22 April 2013. The Morgan Stanley bond issue was self led.

US corporate bond issuance stood at USD 157.0 billion raised in 688 issues. JP Morgan was at top spot among underwriters followed by Deutsche Bank. Corporate debt issuance in Euromarket was USD150.1 billion in 679 issues. In Euromarket region, HSBC was at top spot among underwriters followed by Deutsche Bank.

Interest in High Yield bonds remains high. This has led the firms with low credit ratings to continually access the bond markets and take advantage of the prevailing low interest rates. High Yield issuance stood at USD42.5 billion in April 2013. There has been a substantial decline in yields for these bonds as record inflow in bond funds has increased the market appetite. The largest High Yield bond offering was done by Dish DBS Corp, who provides cable television services in the United States. The company raised USD2.3 billion on by issuing senior bonds maturing in 2018 and 2023.

We believe the bond issuance would continue this trend as record low funding costs attracts more issuers to access the bond markets and the bond investors become more comfortable with adding risk to their portfolios as the uncertainty reduces. However, in the current scenario it is all the more important that investors carry out proper due diligence on the new issuance to make sure that they are being adequately compensated for the risk he is taking on.