Morning Commentary: High-grade primary quiets after solid volume week; inflows increase

By Cristal Cody

Tupelo, Miss., Sept. 14 – Primary action quieted early Friday after high-grade issuers sold more than $30 billion of bonds over the week, in line with syndicate forecasts.

Deal volume was led this week by AbbVie Inc.’s $6 billion four-tranche offering of fixed-rate senior notes, which priced on Thursday.

In other activity, a bond deal is expected soon from Nestle Holdings Inc., which started a roadshow for a Rule 144A and Regulation S offering of dollar-denominated senior notes on Thursday. BofA Merrill Lynch, Barclays, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC are the bookrunners.

Looking at the secondary market, high-grade trading volume has increased steadily over the week, totaling $18.39 billion on Thursday, $18.14 billion on Wednesday, $17.19 billion on Tuesday and $12.82 billion on Monday, according to Trace data.

High-grade inflows lead rise

Meanwhile, inflows to U.S. bond funds and ETFs accelerated to $4.83 billion this week from $2.41 billion a week earlier, led by higher inflows to the investment-grade space, Yuri Seliger, an analyst with BofA Merrill Lynch, said in a note released on Friday.

“Over the last two months, inflows to high grade were concentrated in short-term funds and ETFs,” Seliger said. “By contrast, this past week inflows [except] short-term were the largest since April. At the same time, inflows to short-term high grade instead declined relative to the prior week.”

Inflows to high grade, which includes corporates, Treasuries, agencies and mortgages, increased to $2.89 billion for the week ended Sept. 12 from $1.66 billion a week ago, according to the report.

Short-term inflows declined to $1.31 billion from $1.75 billion, while outside-of-short-term high-grade flows jumped to a $1.57 billion inflow following a $100 million outflow.

The increase in inflows was driven by ETFs, which are usually dominated by institutional investors, Seliger said.

Flows to high grade ETFs rose to a $2.18 billion inflow this week from a $180 million outflow in the previous week. However, inflows to high-grade funds declined to $700 million from $1.84 billion in the prior week, Seliger said.

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