There has been plenty of focus on the new issue calendar of late, mainly because the dearth of supply has left many an investor, and dealer, thirsty for some high-quality names. A sip was given on Oct. 26 with the pricing of the Bank of America conduit, but the glass remains more than half full. What this means for secondary market spreads, however, is being reevaluated as many favorable views are being softened.
Coming into the current supply surplus there was moaning and groaning about the lack of price discovery and liquidity that was blamed for the spread concession in the market. Realized secondary bid list spreads varied widely from what talk was for the sector, so the recently announced conduits were a welcome addition to a market looking for a compass heading. The problem is, commercial investors are looking at the same fast or famine situation seen back in late-spring to early-summer. Spread direction, opined for a tightening just last week by many market participants, seems less clear now. Some $6 billion to $7 billion is expected to hit the market by the Thanksgiving holiday season kick-off and the ride could be a bumpy one.