By Davide Barbuscia

NEW YORK, (Reuters) – U.S. bonds sales by investment grade issuers are likely to decline by about 10% this year due to borrowers competing with higher rates of interest and volatility. A BofA executive stated Tuesday.

The year has started with a rough start for corporate bonds. Investors are concerned about the effect of tighter monetary policy on corporate profits, borrowing costs and the risk of an economic slowdown.

Although they have not increased in size, credit spreads (the interest rate premium that investors pay to own corporate debt rather than safer U.S. Treasury Bonds) have increased.

The ICE (NYSE -) BofA U.S. corporation index tracks dollar investment grade corporate debt and was at 149 base points Monday. It is approximately 50 points higher year-to date, but three basis points below its march high of almost two years ago.

U.S. investment-grade corporate bonds issued in January totalled $470 billion. This is in line with the levels of the previous year as more borrowers, concerned by higher interest rates, sought to secure still favorable financing terms.

However, this pace is now slower as the markets have become more volatile due to concerns about economic growth and monetary policy.

Mead stated that overall supply is expected to fall between 10% and 12% in 2019. However, Mead noted that the market expects the second-half of 2019 to be more quiet than it was in 2020 or 2021.

According to data from Refinitiv, the U.S. issued approximately $1.5 trillion in investment-grade bonds last year.

The global central banks have been withdrawing their stimulus funds rapidly, causing liquidity problems in the financial markets. Traders are now faced with unpredictable intra-day swings, shrinking deal sizes, and traders must navigate these wild fluctuations.

Mead stated that volatility has been the main theme of our market, as well as other asset classes. He also said that investors should be more cautious.

He said that although they are still actively participating in the deals and showing greater price discipline than before, they were more engaged.

The U.S. credit market rallied when the Federal Reserve raised rates in March. However, that was only temporary and corporate bonds with lower ratings have fallen to new lows.

Expect the Fed to raise interest rates 50 basis points in June and July. In June, it plans to begin reducing its balance sheets at a faster pace than in previous “quantitative tightening”.

Mark Howard, managing director at BNP Paribas, New York (OTC) said that these factors, including the QT and rate hikes will begin to have an impact on the real economy.

“What’s notable about what we’ve seen in markets over the last week or so, is moving away from a fear of higher rates to more of a fear of growth deceleration,” he said, “and that contributes to some of the anxiety in the short term in credit. Spreads are being affected by growth concerns right now