WASHINGTON, May 19 (Reuters) - Moody's downgrade of the U.S. sovereign credit rating late Friday appeared to have a modest impact on corporate bond market activity on Monday, as spreads widened slightly and new bond sales started the week softer than expected.
Late Friday, ratings agency Moody's announced a one-notch downgrade to the U.S. government's credit rating, at the same time changing its rating outlook from stable to negative.
"This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns," Moody's wrote late Friday.
The downgrade from Moody's follows similar moves from Fitch in 2023 and Standard & Poor's in 2011.
Investment grade bond spreads widened modestly on Monday after the Friday ratings downgrade, according to Dan Krieter, head of fixed income strategy at BMO Capital Markets.
The ICE BofA Corporate Index was roughly one basis point wider on the day while the High Yield Index was around five bps wider, Krieter noted.
IG bond spreads had previously tightened two basis points to 93 bps to close Friday trading, according to the ICE BofA Corporate Bond Index (.MERC0A0), opens new tab. This is their tightest since March 27 before Trump's 'Liberation Day' tariffs.
Junk bond spreads had tightened a modest 4 bps to 316bp late Friday, according to the ICE BofA High Yield Bond Index (.MERH0A0), opens new tab.
At least six companies, including French bank Crédit Agricole (CAGR.PA), and food services company Sodexo (EXHO.PA), announced bond offerings on Monday but there were some who decided to hold back any issuance, said one senior syndicate source.
Monday issuance volume is likely to be less than $10 billion which was a slow start for a week that is expected to see $30 billion of new bond supply, according to Krieter.
"So a bit lighter with some borrowers potentially wanting to see how the market reacted to the news," he said.
"Given the muted response, I would expect (issuance) tomorrow to be large."
Reporting by Matt Tracy, Editing by Nick Zieminski
