Morning Commentary: Slower high-grade deal pipeline eyed; Diageo, American Tower on tap

By Cristal Cody

Tupelo, Miss., Sept. 30 – Investment-grade corporate bond supply is expected to remain slow this week with several issues, including the U.S. presidential impeachment process, quarterly earnings blackout reporting periods and a week-long holiday in Asia, affecting the primary market.

Syndicate sources forecast about $10 billion to $15 billion of deal volume this week. October is projected to post about $80 billion to $90 billion of total bond issuance, sources report.

A couple of high-grade issuers offered bonds early at the start of Monday’s session.

Diageo Capital plc marketed two tranches of fixed-rate guaranteed notes due 2024 and 2029.

The notes are guaranteed by parent company Diageo plc, a London-based premium drink company.

American Tower Corp. also plans to return to the primary market after bringing a high-grade bond deal in June. The Boston-based telecommunications provider is offering senior notes due 2027 and 2049.

Deal action is expected to stay light during Monday’s session before picking up on Tuesday, a source said.

Meanwhile, Lipper US Fund Flows reported corporate investment-grade funds had inflows of $1.07 billion for the past week ended Wednesday.

Overall flows went from “risk-on to risk-off” last week, while inflows to the high-grade space, including corporates, agencies, Treasuries and mortgages, rebounded to $3.88 billion from $2.53 million in the prior week, according to a BofA Merrill Lynch research note.

The high-grade improvement was due to short-term high-grade inflows increasing to $710 million from a $570 million outflow in the previous week.

Excluding short-term high-grade inflows were little changed at $3.16 billion, up from $3.1 billion in the previous week.

High-grade inflows were led by ETFs, which saw inflows climb to $2.62 billion in the past week from $1.41 billion a week earlier, according to the report.

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