Investment-grade primary market stays quiet; credit spreads soften; funds, ETF inflows soar

By Cristal Cody

Tupelo, Miss., Dec. 18 – Primary activity remained quiet on Friday with high-grade bond supply likely finished for the year as 2020 winds down.

Deal volume has been quiet since Wednesday.

Week to date, high-grade supply totals $2.28 billion from three offerings, including Rule 144A and Regulation S deals from Microchip Technology Inc. on Monday and Berry Global, Inc. on Tuesday and a registered offering from Fidus Investment Corp. on Wednesday.

Zero up to about $10 billion of volume was expected by market participants for this week and the rest of the month.

More than $42 billion of investment-grade bonds have priced month to date, beating market forecasts of about $25 billion to $35 billion of volume for the month.

Looking ahead to January, high-grade supply is expected to ramp up with about $125 billion to $135 billion of volume forecast.

In the secondary market, high-grade trading volume thinned on Thursday to $19.31 billion from $21.3 billion on Wednesday, $21.05 billion on Tuesday and $20.87 billion on Monday, according to Trace.

Market tone weakened over Friday’s session with stock indexes down across the board.

In the high-grade space, the PIMCO Investment Grade Corporate Bond index ended the session off 0.02% at $116.63.

The iShares iBoxx Investment Grade Corporate Bond ETF edged down 0.07% to $137.16.

The Markit CDX North American Investment Grade 35 index softened to a spread of 53.3 basis points from 52.48 the previous day. Credit spreads were about 0.5 bp tighter from the same session a week ago.

High-grade inflows slow

Meanwhile, U.S. equity funds and ETFs saw a $33.12 billion inflow for the past week ended Wednesday, the third highest weekly inflow on record and up from $5.57 billion of inflows in the previous week, BofA Securities Inc. analysts said in a research note released Friday.

High-grade inflows slowed to $3.08 billion from $3.61 billion a week earlier, while fund inflows declined to $1.4 billion from $2.42 billion.

Short-term saw a $1.87 billion outflow this past week following $2.66 billion of inflows in the previous week.

Excluding short-term inflows climbed to $4.95 billion from $950 million last week, while ETF inflows rose to $1.68 billion from $1.2 billion, according to the report.

Investment-grade corporate fund inflows declined over the week ended Wednesday to $1.73 billion from $2.9 billion in the prior week, Refinitiv Lipper US Fund Flows said.

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