Morning Commentary: Investment-grade primary market quiets; fund, ETF inflows slow

By Cristal Cody

Tupelo, Miss., Dec. 11 – The investment-grade primary market quieted early Friday with no reported issuers following stronger-than-expected deal volume week to date.

High-grade issuers sold more than $22 billion of issues over the week, outpacing a range of $15 billion to $20 billion of supply expected by market participants.

Month to date, more than $40 billion of investment-grade bonds have priced, compared to $25 billion to $35 billion of issuance anticipated for December.

Meanwhile, U.S. investment-grade bond fund and ETF inflows slowed to $3.61 billion for the past week ended Wednesday from $6.21 billion in the previous week, according to a BofA Securities, Inc. research note released on Friday.

Fund inflows declined to $2.42 billion from $5.04 billion a week earlier and slid to $950 million from $5.68 billion when excluding short-term.

ETF inflows edged up to $1.2 billion from $1.16 billion in the previous week, and short-term inflows climbed to $2.66 billion this past week from $520 million in the prior week.

On Thursday, Refinitive Lipper US Fund Flows reported a decline in investment-grade corporate fund inflows to $2.9 billion from $5.94 billion in the prior week.

Market tone was mixed at the start of the day with equities down on stalled Covid-19 stimulus measures and a possible U.S. government shutdown due to funding.

In the high-grade space, the iShares iBoxx Investment Grade Corporate Bond ETF was up a modest 0.02% at $137.17.

The Pimco Investment Grade Corporate Bond index softened 0.02% to $116.60.

CI Financial firms

In the secondary market, CI Financial Corp.’s upsized $700 million of 3.2% senior notes due Dec. 17, 2030 (/BBB/DBRS: BBB (high)) that priced on Thursday improved about 7 basis points, a source said.

CI Financial sold $700 million of the 10-year notes at a spread of 230 bps over Treasuries.

The deal was upsized from $300 million, and the notes priced tighter than initial talk in the Treasuries plus 250 bps area.

The secondary market saw its strongest session on Thursday with $24.19 billion of high-grade corporate issues traded, compared to $23.91 billion on Wednesday, $23.86 billion on Tuesday and $22.99 billion on Monday, according to Trace.

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