Following a weak July, companies and municipalities were ready to dip their toes back in the markets for stocks and bonds last month, judging by the number of requests for unique securities codes known as CUSIP numbers that are used to identify securities.
U.S. and Canadian companies, for example, asked for 12% more CUSIPs in August than in July, although through August the requests were down 8.6% from the same period last year, according to a report from CUSIP Global Services, which administers the system.
Municipal bond requests were up 7% for the month and are up 3.4% year to date through August. CUSIPs are issued to help facilitate ordering, trading and clearing, and are required by exchanges for the listing of most public and private securities.
“We did see a slower issuance after Brexit,” said Gerard Faulkner, director of operations for CUSIP Global Services, in an interview. Issuance is often softer in the beginning of the year and picks up as the months progress, but there is no hard and fast rule. “It’s hard to say if there’s always a pattern or trend,” he said.
Companies and municipalities are sensitive to interest-rate fluctuations, Mr. Faulkner said, particularly in the bond markets.
“If market rates are coming down, we do see an uptick in corporate bond issuance,” he said.
Bond issuers often act when market sentiment is strongly predicting a Federal Reserve move at its next meeting.
Among state bond issuers, Texas is leading the way with 1,414 new CUSIP requests this year, followed by New York and California with 1,093 and 836, respectively.
“Based on the August data, we expect to see a sustained pace of new security issuance through the next several months,” Mr. Faulkner said in a statement that accompanied the report.
The U.S. market for initial public offerings has been lackluster this year, but August indicates that activity may pick up. Domestic corporate equity CUSIP orders soared to 1,078 last month, the highest monthly tally since April 2015, CGS said.
CUSIP stands for Committee on Uniform Security Identification Procedures.
THE WALL STREET JOURNAL
By MAXWELL MURPHY
Sep 14, 2016 7:10 am ET