The most turbulent capital markets in recent memory have made market timing a must for savvy treasurers.
Over $7 billion of corporate debt issues were elbowing their way into the capital markets on October 28, seeking to take advantage of the spike in investor risk appetite immediately after the announcement of the European debt deal.
The surge in issuance capped off a month characterized by a remarkable reversal of fortune. At the beginning of October, 10-year Treasuries hit their all-time lowest yield (1.71 percent), as investors loaded up to hedge against a Eurozone meltdown.
But as news of progress in European debt negotiations emerged in the second half of the month, 10-year bond yields skyrocketed 70 basis points – the biggest Treasury market meltdown since 2003. Meanwhile, bond vols shot up, equities spiked and equity vols fell sharply. The hedge quickly became a liability.
No wonder that many firms that had been sitting on their hands until the markets stabilized are now piling in, before the inevitable concerns about the Greek deal begin to surface as its technical details emerge. One lesson market participants learned in October is a strong market one day can be followed by a rout the next.
Among the biggest issuers marketing deals are Verizon Communications, with a $2 billion offering, and IBM, with $1 billion. BP Capital – the financing sub of BP – US Bancorp and CSX are all teeing up deals worth over $500 million, bankers say.