High-grade primary quiet, supply forecast; funds inflows increase; financial paper mixed

By Cristal Cody

Tupelo, Miss., April 26 – High-grade primary action remained quiet on Friday following light bond issuance over the week.

Investment-grade companies priced more than $6 billion of bonds week to date as volume thinned among earnings releases after the Easter holiday weekend.

About $15 billion to $25 billion of volume was expected for the week.

In the week ahead, syndicate sources forecast about $15 billion to $20 billion of new issuance.

The Markit CDX North American Investment Grade 32 index tightened about 1 basis point to close at a spread of 57 bps.

Meanwhile, inflows climbed higher this week.

Inflows to U.S. high-grade bond funds and ETFs rose to $5.48 billion for the week ended April 24 from $2.89 billion in the prior week, according to a BofA Merrill Lynch research note released on Friday that includes data for corporates, Treasuries, agencies and mortgages.

“But keep in mind that the weekly headline number is much higher than the $2.43 [billion] sum of daily inflows over the past four business days because of an outsized $2.67 [billion] inflow to one high-grade bond fund that only reports flows data on a weekly basis,” Yunyi Zhang, a BofA Merrill Lynch credit strategist, said in the report.

High-grade funds reported a large increase in inflows to $6.3 billion for the past week from $1.99 billion the prior week, while high-grade ETFs experienced an $810 million outflow this past week following a $910 million inflow a week earlier, Zhang said.

Short-term high grade had a minimal $10 million outflow in the past week, down from a $550 million inflow in the prior week, while high-grade-excluding-short-term saw inflows accelerate to $5.49 billion this past week from $2.35 billion a week earlier.

Cantor firms, RBC mixed

Financial paper that priced this week was mixed in secondary trading on Friday, a market source said.

Cantor Fitzgerald, LP’s 4.875% senior notes due May 1, 2024 (BBB-/BBB-), sold on Wednesday, firmed to 257 bps bid, 252 bps offered.

Cantor Fitzgerald priced an upsized $600 million of the five-year notes on Wednesday at a spread of Treasuries plus 262.5 bps.

Initial price talk was in the Treasuries plus 287.5 bps area. The deal was upsized from $500 million.

Cantor Fitzgerald is a financial services firm based in New York.

Royal Bank of Canada’s $1.5 billion of medium-term senior notes (A2/A/AA), priced in two tranches on Wednesday, traded about 1 bp softer to 1 bp wider on the bid side.

Royal Bank of Canada’s $500 million tranche of floating-rate notes due April 29, 2022, priced at par to yield Libor plus 47 bps, traded at 46 bps bid, 43 bps offered in the secondary market on Friday.

The Toronto-based financial services company’s $1 billion of 2.8% notes due April 29, 2022 eased to 54 bps bid, 51 bps offered.

The notes priced with a Treasuries plus 53 bps spread.

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