The first half of 2026 witnessed unprecedented activity in the US investment-grade (IG) primary issuance market, reaching a record $1.22 trillion. This figure represents a 30% increase from the previous year and surpassed the prior peak set in 2020. Notably, seven deals exceeded $25 billion, a number greater than the total for the past seven years combined. Hyperscalers and financial institutions, particularly banks which accounted for $378.2 billion or 31.0% of total H1 issuance, were major drivers of this surge, although issuance was broad-based across various industries.
Despite the record supply, investor demand remained robust. Deals consistently priced aggressively, moving 28.38 basis points inside initial price talk and achieving 4.03x book coverage, with a modest average new issue concession of 2.95 basis points. However, a shift in investor sentiment became apparent in Q2. As concerns about rising rates and inflation resurfaced, investors grew more selective, favoring higher-quality, shorter-duration credit. This is evidenced by a surge in high-yield (HY) holdings in Q1 followed by a sharp pullback in Q2, while IG holdings increased more steadily.
Domestic investors, in particular, showed a strong preference for quality. Their aggregate holdings of IG increased by 3.8%, with banks and broker-dealers increasing their holdings by 5.7%, mutual funds and ETFs by 3.4%, and insurance companies by 3.0%. The largest dollar gain came from insurers, adding $20.9 billion. This focus on quality was also reflected in a shortening of duration, as investors cut their long-duration exposure in Q2 due to increasing yields and inflation concerns, which disproportionately affected the long end of the market.
