The first quarter of 2021 was a gloomy one for investors as 74% of dollar bonds in our universe delivered a negative price return (ex-coupon). The month of March saw a continuation of February’s disappointing run in bond markets with 82% of dollar bonds delivering negative returns.
Investment Grade bonds (IG) saw yet another month of underperformance vs. High Yield bonds (HY) with one factor being the continued sell-off in US Treasuries that led to a ~25bp rise in yields for both the 10Y and 30Y, currently at 1.74% and 2.40% respectively resulting in a steeper yield curve compared to 2020-end. Overall in Q1, only 17% of IG bonds saw a positive price return, worse than even Q1 2020 when assets sold-off across the board in late March leading to 24% of IG bonds delivering positive price returns. HY on the other hand fared better with 39% delivering a positive return in Q1 2021, far more than the 2% bonds that traded in the green in Q1 2020.
Global corporate dollar issuance volume stood at $439bn for Q1, up 7% vs. Q1 2020. For the month of March, issuance volume stood at $201bn, down 15% vs. last March’s issuance of $236bn and 63% higher than February which was at $115.3bn.
Asia ex-Japan G3 currency Q1 issuance volume stood at 151bn, up 25% vs. Q1 2020. For the month of March, issuance volume stood at $40bn vs. last March’s issuance of $13bn as primary markets were spooked by the March mayhem last year.
Looking at the issuance across industries, the table below shows volumes being dominated primarily by sovereigns and banks, both globally and in the APAC & ME region.
The largest corporate dollar issuance during the quarter was by Verizon raising $25bn via a jumbo nine-part offering . This was followed by Apple’s $14bn six-trancher in early Feb which surpassed 7-Eleven’s $10.95bn offering just a week prior. Other notable deals were that of Boeing that raised $9.825bn via a three-part offering, which offered new issue premiums of 24-45bp on all the three tranches over its older bonds at the time of issuance, Wells Fargo’s $3.51bn 3.9% Perp and Carnival’s 5.75% 2027 amounting to $3.5bn.