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This week saw the end of a record September for US investment grade issuance, with supply reaching $200.9bn — the fifth highest month of issuance on record.

“We've seen a very heavy new issue calendar in September. Part of that is spreads are tight and we've seen Treasury yields come down,” said one portfolio manager. “It's a good time for issuers to term out debt, or raise new debt, whether it's for share repo or general corporate purposes.”

September’s typically busy post-Labor Day volume has added to the momentum for deal volumes, but buyers remain eager.

“Most of the supply has been met with pretty robust demand from the investor side,” the PM said.

This week slowed in issuance compared to the prior weeks, reaching $15.4bn, falling short of consensus expectations of $21.5bn.

This was after the previous full-week ended with $56bn of supply, well above expectations of $30bn.

With a lack of economic data, investors and issuers looked to steer clear of a US federal government shutdown, as Republicans and Democrats were unable to agree on a bill funding government services beyond October.

Indeed, both political parties had failed to reach an agreement by midnight on Tuesday, leading to the first government shutdown since 2018.

”I don't expect that this US government shutdown in and of itself is something that would affect corporate bond issuance,” said another investor. “This is different than with the debt ceiling standoffs, where you actually see that's something that could put credit ratings for the US government into jeopardy.

“Depending upon how long that goes, in a US government shutdown, Treasury payments are still made, there's no real effect on the credit markets, unless it's something that's really extended,” they added.

In spite of the political turmoil, credit conditions have remained benign. According to ICE data, spreads at the end of the week have remained tight at 97bp, as have yields at 4.97%.

Subordinated issues on the rise

On Monday alone, half of the issuance was subordinated, and all of them with maturities over 30-years.

Bank of Nova Scotia was the first bank to tap into this form of debt, with its first Additional Tier 1 deal since 2021. The $1bn deal had a 60NC10 maturity, and had opened with IPTs of 7.25%, before narrowing by 37.5bp to price at 6.875%. We explored some of the dynamics behind Yankee AT1 supply here.

A corporate example was Xcel Energy Inc, with a debut $900m 60NC10 junior subordinated deal. The bond had originally been pitched as a $250m issue, but was upsized significantly at the launch stage to $900m.

Tuesday saw a junior subordinated deal from CenterPoint Energy Inc with a $700m 30.5NC5 tranche, and had the largest spread difference from IPTs of 6.25/6.375%, to a final yield of 5.95%.

“Investors still want yield, so they can pick up some more yield by going down in the capital structure. And so with still resilient economic conditions, they feel comfortable in doing that,” the investor added.

Thermo Fisher returns to IG market after two years

The biotechnology company Thermo Fisher issued the highlight of the week: a four-tranche $2.5bn bond, the proceeds of which will go towards general corporate purposes, including M&A, refinancing, working capital and capital expenditure.

Of the four tranches, the long five-year priced 20bps tighter than IPTs, while the seven-year, 10-year and 12-year spreads narrowed by 25bps.

Thermo Fisher’s last foray in the IG dollar debt market was in November 2023, when the company issued another $2.5bn bond, split into three tranches.

S&P Global on Monday had affirmed its A- rating for Thermo Fisher and its new paper, on the grounds of the company’s “consistent operating results, solid organic growth prospects, and diverse product portfolio.”

Fitch had also kept its A- rating, citing a “continued operating strength and consistent cash generation despite a challenging environment”.

The company has been active in 2025 so far in the M&A space, with two noteworthy acquisitions: Solventum’s Purification and Filtration business for $4bn, and Sanofi’s fill-finish and packaging site in Ridgefield, New Jersey, both completed at the start of September.

Vistra Operations to fund M&A through debt

Another notable deal was Vistra Operations, with a $2bn three-tranche issue, which will go toward refinancing, and partly towards funding the power and electricity company’s planned Lotus Infrastructure transactions.

In May 2025, Vistra agreed to acquire a portfolio of seven natural gas generation facilities, totalling 2,600 megawatts of capacity from Lotus Infrastructure Partners, at a price of $743 per kilowatt, or $1.9bn in total.

The deal is expected to be completed in either late 2025 or early 2026.

Vistra’s multi-tranche bond was split into a $750m three-year, a $500m five-year and a $750m 10-year. Both longer-term tranches priced at spreads 27bps inside IPTs, while the three-year launched and priced 30bps tighter than IPTs.

Q3 2025 thus concludes with a volume totaling $387bn, up from $354bn in the Q2 2025 but down from $393bn in Q3 2024.

Looking ahead, the month of October is expected to see $96.2bn in volume, less than half of September’s total.