Aug 6 (Reuters) - Some corporate bond issuers are

expected to delay sales this week, after market volatility

caused investors to trim corporate bond holdings in favor of

safer U.S. Treasuries, according to bond market participants.

Weaker-than-expected employment and manufacturing growth

data last week have stoked recession fears, hitting stocks and

causing investors to seek safety in U.S. government debt.

That has pushed down Treasury yields, which move inversely

to prices, and caused corporate bond spreads over Treasuries to

reach their widest level since January.

No investment-grade or junk bond deals priced on Monday,

according to International Financing Review data, the 13th day

this year without a deal outside a Friday or a holiday.

Market participants expect this week's pipeline to comprise

higher-quality names which investors deem relatively safe, while

riskier issuers will likely hold off until spread volatility

subsides.

Utility sector issuers made up the majority of high-grade

bond offerings on Tuesday, including a $300 million 10-year

first mortgage bond by Connecticut Light and Power ( CNLTL ).

"The recent equity and credit market volatility won't

eliminate the pipeline altogether, but it will have an impact,"

said Chris Forshner, head of investment grade finance at BNP

Paribas.

"The issuers that will be most impacted are those that ...

need a very solid backdrop from which to sell new-issue bonds."

Junk spreads - the premium investors demand to hold riskier,

low-rated debt over Treasuries - rose to 393 basis points on

Monday, the widest since November 2023, according to the ICE

BofA U.S. High Yield Index.

Spreads for high-grade corporate bonds surged to 112 basis

points on Monday, their highest since December, the ICE BofA

U.S. Investment Grade Corporate Bond Index showed.

The moves followed a credit market rally through most of the

year, as optimism around the U.S. economy despite high interest

rates sent investors hunting for yields.

Just two weeks ago, junk spreads hit their lowest level

since December 2021, while high-grade spreads have also been

contained this year, remaining well below 2023 levels.

Still, the corporate bond sell-off has been milder than for

other risk assets such as stocks, and some investors bought back

into corporate bonds on Monday after trimming exposure earlier

in the year in favor of high-yielding assets.

Dan Krieter, director of fixed income strategy at BMO

Capital Markets, noted on Tuesday that buying made up 54% of BMO

clients' activity in the high-grade market on Monday, the

highest daily share since mid-June.

"They are better value now than they were," said Andrew

Jackson, head of fixed income at Vontobel. "Having taken quite a

lot of risk out of our positions, we're now adding at the margin

risk on the credit side."