High-grade primary silent; funds see record outflows; Verizon firms; Morgan Stanley eases

By Aleesia Forni and Cristal Cody

Virginia Beach, Sept. 24 – Potential bond issuers stood down on Thursday amid a weaker market tone as Lipper reported record outflows from investment-grade corporate bond funds.

For the week ended Wednesday, Lipper reported $3.52 billion of outflows for the asset class, the largest outflow ever for high-grade bond funds.

This figure comes on the heels of last week’s $737 million of outflows, trimming the year-to-date total inflows to $17 billion.

Thursday’s empty session kept the week’s total new issuance at $26.4 billion, with the bulk of that total priced during Monday’s blockbuster $17 billion session.

High-grade bonds were mixed in secondary trading over the session, and credit spreads widened.

Verizon Communications Inc.’s 3.5% notes due 2024 firmed 4 bps.

AT&T Inc.’s bonds (/BBB+/A-) widened 7 bps to 10 bps in the secondary market.

Morgan Stanley’s 4% senior notes due 2025 headed out 2 bps weaker.

In other trading, Home Depot Inc.’s 4.25% senior notes due 2046 were unchanged.

The Markit CDX North American Investment Grade 25 index eased 3 bps to a spread of 86 bps on Thursday.

Investment-grade bank and brokerage CDS prices were higher on Thursday, according to a market source.

Bank of America Corp.’s CDS costs rose 2 bps to 81 bps bid, 84 bps offered. Citigroup Inc.’s CDS costs were also up 2 bps to 88 bps bid, 91 bps offered.

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