IG Bond Pricing New Issue vs Month End

US Investment Grade new bond issues tend to outperform secondary market spreads by approximately 3% by month-end, driven by index rebalancing demand.

Key Takeaways

• 1.US Investment Grade (IG) new bond issues typically trade about 3% tighter at month-end compared to their initial pricing due to pent-up index rebalancing demand.
• 2.The outperformance occurs in two stages: an immediate 'break performance' tightening of 2-3bps followed by a further 1% rally during the final 9 trading days of the month.
• 3.Short-maturity IG bonds (3-5 years) experience the strongest month-end tightening, averaging 5bps tighter than their original pricing.

Table of Contents

• IG bond pricing: new issue vs. the month end
• A two-step process
• A front-end story
• Daily supply snapshot
• Daily dealer inventories update
• Daily HG fund flows
• Daily foreign demand tracker

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