High-grade supply falls short, light April supply eyed; funds see outflows, ETFs inflows

By Cristal Cody

Tupelo, Miss., March 31 – High-grade supply finished March with a bit of a whimper, while April may or may not bring extra supply, sources reported.

Corporate high-grade issuers priced more than $23 billion of notes over the week, in line with market forecasts of about $15 billion to $25 billion of new deals.

March ended the month with about $100 billion of volume, far short of the $150 billion to $170 billion of issuance anticipated for the month.

Looking to the week ahead, supply is expected to be active with about $15 billion to $20 billion of deal volume, sources said.

Market participants were split on April supply with March volume coming in short and murkiness over whether any of that volume would roll over to April.

For April, only about $100 billion of investment-grade bonds are forecast to hit the primary market with less traditional bank issuance for the month anticipated this year, sources said.

Others, though, anticipate supply could hit the $120 billion to $140 billion range.

“IG supply typically slows down in April relative to March due to earnings-related issuance blackouts,” BofA Securities analyst said in a note released Friday. “This year, however, we look for an elevated pace of issuance in April.”

About $45 billion of issuance was missed when the market shut down for more than a week in March due to the stress from bank failures and could come in April, according to the note.

Also, bank supply in the first quarter was “unusually low” at just $9 billion, which suggests potentially higher issuance needs after the major banks report first quarter earnings results in April, BofA said.

The month usually sees an average of more than $175 billion of high-grade corporate issuance alone, one source said.

Friday marked the end of the first quarter, and companies will be headed into blackout reporting periods.

Financial paper was ending the week after a volcanic March mostly better with Deutsche Bank, Barclays, Morgan Stanley and Lloyds Banking Group plc all higher in the secondary market, a source said.

Stocks rallied into the close Friday with indexes closing as high as 1.74%.

Volatility also was receding with the CBOE Volatility index retreating slightly by 1.37% to 18.76 on Friday.

Moody’s Investors Service said next week’s economic calendar “will be heating up” with the release of the March employment report on April 7 and expectations the unemployment rate will hold steady.

Funds outflows increase

Corporate investment-grade fund outflows rose to $881 million for the week ended Wednesday from $865 million in the prior week but still down from $3.89 billion of outflows in the week previous, according to Refinitiv Lipper US Fund Flows.

U.S. high-grade funds and ETFs saw $650 million of outflows for the past week ended Wednesday, up from a $510 million outflow the week prior, according to a BofA Securities note.

High-grade fund outflows rose to $2.07 billion this week from $1.21 billion the previous week.

Meanwhile, ETFs posted inflows of $1.42 billion for the period, up from $700 million of inflows in the previous week.

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