Morning Commentary: Investment-grade primary market quiets; corporate fund inflows improve

By Cristal Cody

Tupelo, Miss., June 29 – Primary action is expected to remain quiet on Friday with no reported deals in the high-grade bond market at the start of the session and ahead of the end of the second quarter.

Supply has been thin over the week and missed syndicate forecasts. More than $4 billion of investment-grade corporate bonds have priced week to date.

Market sources had forecasted about $15 billion to $20 billion of volume with some predicting as little as $5 billion of new issuance for the week.

Charter Communications, Inc. was the sole reported issuer on Thursday with a $1.5 billion two-tranche offering of senior secured notes.

A deal remains in the pipeline from Toyota Motor Credit Corp., which has held fixed-income investor calls over the week in the United States, Europe and Asia for three tranches of senior notes.

Stronger fund flows

For the week ended June 27, Lipper US Fund Flows reported inflows of $1.54 billion for corporate investment-grade funds, up from $411 million of reported inflows in the prior week.

High-grade inflows improved to $1.66 billion from a $230 million outflow in the previous week, according to a BofA Merrill Lynch research note released Friday that cited data from EPFR Global and BofA Merrill Lynch Global Research and includes corporates, Treasuries, mortgages and agencies in the high-grade category.

“This was on the back of higher inflows to short-term high grade,” Yuri Seliger, a BofA Merrill Lynch analyst, said in the note.

Inflows to short-term high grade rose to $1.56 billion from $500 million a week earlier, while the current week posted a lack of outflows outside of short-term to $100 million from $730 million in the prior week.

All of the inflow of $2.5 billion from $110 million to high-grade was from ETFs, Seliger said.

In secondary market activity, trading volume has been strong over the week. On Thursday, $20.44 billion of high-grade bonds were traded, compared to $24.05 billion on Wednesday, $21.20 billion on Tuesday and $15.51 billion on Monday, according to Trace.

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