Morning Commentary: Investment-grade primary market quiets; high-grade inflows rise over week

By Cristal Cody

Tupelo, Miss., April 27 – High-grade bond action stayed quiet early Friday as the market takes a breather ahead of what is expected to be heavy issuance in May.

More than $23 billion of reported investment-grade bonds priced over the first four sessions of the week, compared to market forecasts of about $25 billion to $30 billion of supply.

As much as $140 billion of new issuance is predicted in May, a source said.

While U.S. fund and ETF flows weakened for risk assets including stocks, high-yield and emerging markets bonds for the week ended April 25, inflows increased for “safer asset classes such as high-grade and government bonds,” Yuri Seliger, an analyst with BofA Merrill Lynch, said in a note released on Friday.

“The overall impact on overall fixed income was a decline in inflows to $3.12 [billion] from $4.36 [billion],” he said, citing data from EPFR Global and BofA Merrill Lynch Global Research.

High-grade inflows rose to $3.33 billion from $860 million in the prior week, according to the note.

Inflows increased to $1.16 billion this week from $260 million in the previous week for short-term high grade and to $2.17 billion from $60 million outside of short term.

“Most of the increase was from ETFs that tend to be dominated by institutional investors,” Seliger said.

ETF inflows rose to $2.48 billion from $38 million in the previous week.

Inflows to funds increased to $850 million for the week ended Wednesday from $470 million in the prior period.

For the week ended April 25, Lipper US Fund Flows reported inflows of $2.01 billion for corporate investment-grade funds, up from inflows of $1.54 billion reported for the week ended April 18.

The week also saw heavy secondary market trading volume. On Thursday, $22.01 billion of investment-grade issues were traded, compared to $22.29 billion on Wednesday, $20.59 billion on Tuesday and $18.85 billion on Monday, according to Trace.

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