New Issues: Investors await pickup in activity.

(From FT Investor (Stories))

With most of Europe taking its May Day break and UK markets looking forward to a bank holiday on Monday, new issues were thin on the ground on Thursday, with trading in the secondary market equally quiet.

Investors will be looking for a pickup in new issuance later this month, however.

Activity in the primary market traditionally tends to increase in May, but some analysts think the increase might be accentuated this year. "Now that the war in Iraq is over there will be borrowers who did not come to the market earlier in the year and are looking to get issuance done," said David Brickman, senior portfolio strategist at BNP Paribas in London.

He suggests that the recent pronounced tightening in corporate bond spreads gives issuers an added incentive to come to the market sooner rather than later. "Spreads have had such a good run that, from a borrower's perspective, it's extremely attractive to be issuing at these sorts of levels," he said.

An increase in supply could act as a test of the rally's strength. With the fundamentals still relatively weak, if bond prices are being supported mainly by a combination of large pent-up demand and low issuance, the question arises of how spreads might respond to a strong increase in supply.

"The chances are that new supply, provided that it's well priced and well executed, ...