Strong high-grade supply forecast; market eyes Bayer deal; Walmart considers offering

By Cristal Cody

Tupelo, Miss., June 15 – The high-grade bond primary market stayed quiet on Friday ahead of what is expected to be a hefty week of issuance.

About $35 billion to $40 billion of volume is forecast for the upcoming week with a Rule 144A and Regulation S deal from Bayer AG (Baa1/BBB/A-) in focus after the company wrapped a three-day round of fixed income investor calls on Friday, a source said.

Also coming up on Monday, Walmart Inc. will hold fixed income investor calls.

Issuers ended up beating syndicate supply forecasts this week with more than $24 billion of investment-grade bonds sold. Market sources had expected about $15 billion to $20 billion of new issuance.

Investment-grade bonds priced over the week were mixed in secondary trading, a source said.

Concho Resources Inc.’s $1.6 billion of 10- and 30-year guaranteed senior notes (Baa3/BBB-/BBB-) that priced on Thursday traded wrapped around issuance.

The Markit CDX North American Investment Grade 30 index closed slightly tighter at a spread of 61 basis points.

Walmart sets investor calls

Walmart (Aa2/AA/AA) plans to hold fixed income investor calls on Monday for a potential deal, according to a market source.

Barclays, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC are the arrangers.

The discount retailer is based in Bentonville, Ark.

Concho Resources flat

Concho Resources’ 4.3% notes due Aug. 15, 2028 traded wrapped around issuance in the secondary market at 140 bps bid, 138 bps offered on Friday, a source said.

Concho sold $1 billion of the 10-year notes on Thursday at a spread of Treasuries plus 140 bps.

The oil and natural gas company is based in Midland, Texas.

Inflows improve

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.

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