High-grade market action quiets; busy week forecast on deal backlog; new bonds mixed

By Cristal Cody

Tupelo, Miss., March 29 – Investment-grade issuers stayed to the sidelines during the short session on Thursday following more than $14 billion of volume in the first three days of the week.

The U.S. financial markets closed early at 2 p.m. ET and will reopen on Monday following the Good Friday holiday.

A backlog of deals in the pipeline is expected to keep issuance active in the week ahead with syndicate sources forecasting about $20 billion to $25 billion of supply.

About $80 billion to $90 billion of supply is forecast for April, down from more than $124 billion of volume in March, Yunyi Zhang, an analyst with BofA Merrill Lynch, said in a note released on Thursday.

“April usually means a slowdown in volumes from March, and this time should be no exception,” Zhang said. “With the big U.S. banks kicking off another earnings season in mid-April, non-financial supply should decline going into the blackout windows, while bank supply could rebound in the second half of the month.”

Supply related to mergers and acquisitions is not expected to continue in April at March’s heavy pace of $49.1 billion, which included a $40 billion deal from CVS Health Corp., according to the note.

March volume was up 26% from February and included $94.6 billion of industrials bonds priced and $29.8 billion of financial paper sold, according to the BofA Merrill Lynch report.

New issues priced over the week were mixed in the secondary market on Thursday.

Mylan Inc.’s $1.5 billion of senior notes (Baa3/BBB-/BBB-) priced in two tranches during the previous session tightened about 1 basis point.

CRH America Finance, Inc.’s $1.5 billion of senior notes (Baa1/BBB+/) brought to the market in two tranches on Tuesday softened about 2 bps.

Dollar General Corp.’s $500 million of 4.125% senior notes due May 1, 2028 sold on Monday tightened about 2 bps.

Elsewhere, over the last four business days, “outflows from high grade, high yield and global EM bonds were partially offset by an inflow to leveraged loans,” Yuri Seliger, an analyst with BofA Merrill Lynch, said in the note. “The outflow from high grade was $0.58 [billion] after a $2.93 [billion] inflow the week before.”

Flows turned negative at minus $27 million for short-term high-grade bonds, he said.

Mylan improves

Mylan’s 4.55% notes due April 15, 2028 firmed to 179 bps bid, 176 bps offered in the secondary market, a source said.

The company priced $750 million of 4.55% 10-year notes in the previous session at a spread of Treasuries plus 180 bps.

Mylan’s $750 million of 5.2% notes due April 15, 2048, priced at a Treasuries plus 220 bps spread, tightened to 219 bps bid, 216 bps offered.

The notes are guaranteed by parent holding company, Mylan, NV.

Mylan is a pharmaceuticals company with principal executive offices in Hatfield, Hertfordshire, United Kingdom, and global headquarters in Canonsburg, Pa.

CRH notes ease

CRH America Finance’s 3.95% notes due April 4, 2028 eased to 127 bps bid, 124 bps offered in secondary trading, according to a market source.

The company priced $900 million of the 10-year notes on Tuesday at a spread of Treasuries plus 125 bps.

The $600 million tranche of 4.5% notes due April 4, 2048, priced in Tuesday’s offering at a Treasuries plus 155 bps spread, softened to 157 bps bid, 155 bps offered.

CRH America is a U.S. financing arm of Dublin-based building materials business group CRH plc.

Dollar General firms

Dollar General’s 4.125% senior notes due May 1, 2028 firmed in the secondary market to 128 bps bid, 126 bps offered, a source said.

Dollar General sold $500 million of the notes (Baa2/BBB/) on Monday at a spread of 130 bps over Treasuries.

The discount retailer is based in Goodlettsville, Tenn.

Funds see modest inflows

Investment-grade corporate funds saw a modest $0.438 billion inflow for the week to March 28, smaller than the $3.484 billion inflow of the previous week, according to sources familiar with the fund-flow statistics generated by AMG Data Services Inc.

That gain, in turn, followed a $2.316 billion inflow which more than reversed the rare $740 million net outflow figure that preceded it, as reported by the Arcata, Calif.-based unit of Thomson Reuters Corp’ s Lipper analytics division.

There was also an outflow during the Feb. 14 week but otherwise it has been all cash additions, including a 21 week stretch before the Feb. 14 week that dated back to mid-September, according to a Prospect News analysis of the data.

The latest gain raises the year-to-date inflow for the IG corporates to $29.58 billion from $26.10 billion the previous week, setting a new peak level for the year so far.

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