Morning Commentary: Investment-grade primary market quiet; high-grade inflows improve

By Cristal Cody

Tupelo, Miss., June 15 – The high-grade primary market started Friday mostly quiet after more than $12 billion of bonds priced on Thursday.

Volume week to date totals more than $24 billion. Syndicate sources had forecasted about $15 billion to $20 billion of supply.

UnitedHealth Group Inc. led deal action in the previous session with a $4 billion five-part offering of notes, which the company further detailed in an FWP filing with the Securities and Exchange Commission filed on Friday.

Elsewhere, for the week ended June 13, Lipper US Fund Flows reported inflows of $2.04 billion for corporate investment-grade funds, compared to inflows of $1.33 billion in the prior week.

BofA Merrill Lynch said in a report released Friday that high-grade inflows rose over the week ended Wednesday.

Inflows to fixed income climbed to $4 billion from $830 million, “with flows improving for all major sectors including high grade, high yield and global EM bonds,” Yuri Seliger, a BofA Merrill Lynch analyst, said in the note.

Inflows to high grade rose to $940 million from $52 million in the prior week, according to the note.

“All of the improvement was from short-term,” Seliger said.

Short-term inflows rose to $940 million from $520 million in the previous week.

Outside of short-term, inflows declined slightly to $220 million from $250 million.

“In fact, short-term bonds have accounted for 80% of total inflows to high grade over the past five weeks,” Seliger said.

Inflows to high-grade funds declined to $960 million from $1.14 billion, while inflows for ETFs turned positive with a $200 million inflow after a $370 million outflow in the prior week, according to the note.

Looking at the secondary market, trading volume has been strong over the week. On Thursday, $19.29 billion of bonds were traded, compared to $20.37 billion on Wednesday, $19.63 billion on Tuesday and $15.09 billion on Monday, according to Trace.

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