Morning Commentary: Primary quiet; investment-grade inflows improve; Salesforce.com active

By Cristal Cody

Tupelo, Miss., April 13 – High-grade deal activity stayed quiet early Friday amid the start of bank and financial earnings releases.

Investment-grade issuers priced more than $7 billion of reported bonds week to date, coming in lower than syndicate forecasts of about $10 billion to as much as $17 billion of volume.

The start of earnings season and spring break vacations have kept primary activity thin over the week, according to market sources.

On Friday, Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co. released first-quarter earnings.

The three-month Libor has held steady over the week at 2.34%, a source said.

In other activity, flows for investment-grade credit improved for the week ended April 11, Yuri Seliger, an analyst with BofA Merrill Lynch, said in a research note released on Friday.

“Inflows to high grade increased to $2.54 [billion] from $1.71 [billion], with most of the inflow coming from ETFs,” Seliger said, citing data from EPFR Global and BofA Merrill Lynch Global Research.

The ETF inflow was $2.23 billion, compared to a $310 million inflow for funds.

“Inflows were also mostly driven by ETFs a week earlier, with $1.55 [billion] coming from ETFs and $0.16 [billion] from funds,” Seliger said. “This is unusual, as funds typically account for most inflows. This suggests inflows to high grade over the past two weeks were driven by institutional investors that tend to be more dominant in ETFs.”

Inflows to short-term high grade declined to $850 million from $910 million – “meaning all of the increase was outside of short-term, where inflows rose to $1.69 [billion] from $0.80 [billion],” Seliger said.

Lipper US Fund Flows reported inflows of $3.35 billion for corporate investment-grade funds for the week ended April 11.

Salesforce.com active

Elsewhere, Salesforce.com, Inc.’s $2.5 billion of senior notes (A3/A-) that priced in two tranches on April 5 were mixed in early secondary trading on Friday, a source said.

Salesforce.com’s 3.25% notes due April 11, 2023 edged lower to 99.95 from 99.97 on Thursday.

The company sold $1 billion of the five-year notes at 99.94 to yield 3.263%, or a spread of Treasuries plus 62.5 basis points.

Salesforce.com’s 3.7% notes due April 11, 2028 rose a dime to 100.46 early Friday after trading heavily on Thursday.

The San Francisco-based cloud computing company priced $1.5 billion of the 3.7% 10-year notes at 99.975 to yield 3.703%, or a spread of 87.5 bps over Treasuries.

Overall secondary market trading volume in the broader high-grade bond market totaled $17.33 billion on Thursday, compared to $17.73 billion on Wednesday, $19.19 billion on Tuesday and $14.67 billion on Monday, according to Trace.

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