High-grade primary quiets; Japan Agency markets bonds; steady supply eyed over earnings week

By Cristal Cody

Tupelo, Miss., July 10 – The high-grade primary market stayed fairly quiet on Friday with just one split-rated issuer pricing over the session.

Carpenter Technology Corp. sold $400 million of eight-year senior notes (Ba3/BBB-/) following marketing on Thursday.

In other action, Japan International Cooperation Agency held fixed income investor calls for an upcoming dollar-denominated registered offering of 10-year guaranteed bonds.

More than $17 billion of corporate high-grade bonds and nearly $19 billion of sovereign, supranational and agency notes were priced week to date.

About $20 billion to $25 billion of deal volume was expected for the week.

Looking ahead to next week, syndicate sources forecast about $15 billion to $20 billion of issuance with the potential for more.

Bank and financial earnings will be in focus over the week ahead with second quarter reports due from companies including JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Goldman Sachs Group Inc.

Investment-grade market tone was mixed over the day.

The Markit CDX North American Investment Grade 33 index closed modestly tighter at a spread of 74.69 basis points.

The iShares iBoxx Investment Grade Corporate Bond ETF finished down 0.18% at 135.87.

The PIMCO Investment Grade Corporate Bond Index closed off 0.09% at 115.33.

Overall inflows remained strong over the past week ended Wednesday in the high-grade space in corporate bonds, agencies, Treasuries and mortgages, BofA Securities, Inc. analysts said in a note released Friday.

U.S. investment-grade bond fund and ETF inflows totaled $8.33 billion for the holiday-shortened week, down from an $11.02 billion inflow in the prior week.

High-grade inflows were led by $5.26 billion into ETFs and $6.6 billion into the high-grade space excluding short-term, according to the note.

Short-term high-grade inflows totaled $1.73 billion, while funds inflows came to $3.07 billion for the week.

Refinitive Lipper US Fund Flows reported on Thursday that investment-grade corporate fund inflows totaled $7.18 billion, up from $7.07 billion in the previous week.

Simon Property improves

New issues priced this week are trading mostly flat to moderately better in the secondary market, sources said.

Simon Property Group LP’s $2 billion of notes (A2/A/) priced in three parts on Monday improved.

The company’s reopened 3.5% notes due Sept. 1, 2025 headed out on Friday at 108.27.

Simon Property priced a $500 million add-on to the issue on Monday at 107.396 to yield 1.91%, or a Treasuries plus 160 bps spread.

The issue originally priced in a $600 million tranche on Aug. 10, 2015 at 99.354 to yield 3.577% and a spread of 135 bps over Treasuries. The total outstanding is now $1.1 billion.

The company’s 3.8% notes due July 15, 2050 also were stronger at 104.75 on Friday.

Simon Property sold $750 million of the 30-year notes at 99.308 to yield 3.839%, or a spread of 240 bps over Treasuries.

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