Fitch: U. S. Financial Bond Issuance Slows; Yields Decline
"While market volatility rocked global fixed-income markets in the first half of 2106, U. S. markets exhibited less volatility. Yields have not been unaffected but managed to grind tighter, and Fitch expects bond issuance will continue to grow at a slower pace," said William Browne, Group Credit Officer, Fitch Ratings.
Banks that are subject to Dodd-Frank Act Stress Testing (DFAST) comfortably exceeded required minimums in the latest test and may shift their focus from meeting regulatory benchmarks to distributing earnings. As a result of the 2013 changes to regulatory capital requirements, preferred equity securities have increased as a percentage of banks' capital structure for banks with more than $15 billion in assets.
Unsecured debt issuance has been limited from business development companies (BDC) and supply has also been reduced by some BDCs repurchasing debt with proceeds from portfolio repayments and borrowings on lower-cost revolvers. Fitch expects that BDCs will issue debt sparingly until portfolio valuation and performance stabilize.