Morning Commentary: Primary market quiet; high-grade inflows drop; Harris notes improve

By Cristal Cody

Tupelo, Miss., May 25 – The primary market stayed quiet early Friday with little activity expected over the short session.

The bond markets will close at 2 p.m. ET on Friday and will remain closed on Monday for the Memorial Day holiday.

More than $21 billion of investment-grade bonds priced over the week. Market sources had expected about $25 billion of supply for the holiday-shortened week.

For the week ended May 23, Lipper US Fund Flows reported inflows of $2.53 billion for corporate investment-grade funds, compared to reported inflows of $3.07 billion in the previous week and $804 million in the prior week.

Inflows to short-term high grade remain “elevated compared to those in March and the first half of April,” Yuri Seliger, analyst with BofA Merrill Lynch, said in a note released Friday.

High-grade inflows totaled $1.68 billion for the week ended Wednesday, down from $2.49 billion a week earlier, according to the note.

Inflows to short-term high grade accounted for 69% of the total, or $1.16 billion, down from $1.41 billion in the prior week. Inflows to high grade outside of short-term dropped to $520 million from $1.08 billion.

Inflows declined also for high-grade funds to $500 million from $1.06 billion, Seliger said.

Elsewhere, new issues priced this week have been trading mostly better, according to market sources.

Harris Corp.’s $850 million of 4.4% senior notes due June 15, 2028 (Baa3/BBB-/BBB) opened better at 100.61 from where the notes went out on Thursday at 100.37 after trading heavily in the previous session, a source said.

The Melbourne, Fla.-based communications and information company priced the notes on Wednesday at 99.99 to yield 4.401%, or a spread of Treasuries plus 140 basis points.

Secondary trading volume has been mixed this week. On Thursday, $16.59 billion of high-grade bonds were traded, compared to $20.22 billion on Wednesday, $18.47 billion on Tuesday and $14.05 billion on Monday, according to Trace.

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