High-grade action quiet; steady volume on tap ahead of holiday; inflows dip; Fidelity firms

By Cristal Cody

Tupelo, Miss., May 17 – The high-grade primary market quieted on Friday following strong weekly issuance in line with syndicate forecasts.

More than $29 billion of investment-grade bonds priced over the week with supply limited to sessions on Tuesday, Wednesday and Thursday. Market participants had expected about $25 billion to $35 billion of deal volume for the week.

Looking to the week ahead, volume is expected to slow in front of the long Memorial Day holiday weekend.

Syndicate sources forecast about $20 billion to $25 billion with issuance likely front-loaded depending on market tone.

Lipper US Fund Flows reported that corporate investment-grade fund inflows fell to $2.18 billion for the week ended May 15 from inflows of $3.3 billion in the previous week.

Investors purchased more high-grade and defensive government bonds over the week, while risk-off flows grew for U.S. mutual fund and ETFs, according to a BofA Merrill Lynch research note released on Friday.

The net effect was the inflow to fixed income decelerated to $2.41 billion from $3.85 billion, credit strategist Yuri Seliger said in the note.

High-grade inflows, including corporates, agencies, Treasuries and mortgages, increased to $3.65 billion from $3.1 billion in the previous week.

Inflows to short-term high-grade were little changed at $960 million this week from $920 million a week ago, Seliger said.

Excluding short-term flows “drove the increase” and rose to $2.69 billion from $2.17 billion in the prior week, according to the report.

Meanwhile, inflows to high-grade funds declined to $1.55 billion for the week ended Wednesday from $1.98 billion in the previous week, which was “more than offset by ETF inflows” climbing to $2.1 billion from $1.12 billion a week ago, Seliger said.

“ETF flows tend to be more dominated by institutional investors,” he added.

In the secondary market, new issues priced this week mostly tightened, market sources said.

Dow Chemical Co.’s $2 billion of senior notes (Baa2/BBB/BBB+) priced in three tranches in a Rule 144A and Regulation S offering on Thursday traded about 1 basis point to 3 bps tighter to 1 bp softer on the long end.

Fidelity National Information Services, Inc.’s $1 billion of 3.75% senior notes due May 21, 2029 priced Tuesday in tandem with a multi-currency bond offering to fund its acquisition of Worldpay Inc. improved about 7 bps.

In other secondary trading, new issues from International Business Machines Corp. and Bristol-Myers Squibb Co. priced in the previous week were mostly flat.

The Markit CDX North American Investment Grade 32 index closed the day steady at a spread of 62 bps.

Dow Chemical mixed

Dow Chemical’s 3.15% notes due May 15, 2024 traded on Friday at 101 bps bid, 98 bps offered, a market source said.

The company sold $500 million of the five-year notes on Thursday at a spread of 102 bps over Treasuries.

Dow Chemical’s $750 million of 4.8% notes due May 15, 2049 eased to 201 bps bid, 197 bps offered in secondary trading.

The notes priced with a spread of 200 bps over Treasuries.

The specialty chemicals company and subsidiary of Dow Inc. is based in Midland, Mich.

Fidelity improves

Fidelity National Information Services’ 3.75% senior notes due May 21, 2029 (Baa2/BBB/BBB) were quoted better at 128 bps bid, 124 bps offered in the secondary market on Friday, a source said.

The notes priced in a $1 billion offering on Tuesday at a spread of Treasuries plus 135 bps.

Fidelity also sold a €5 billion six-part offering of euro-denominated senior notes and £1.25 billion of sterling-denominated notes in two tranches on Tuesday.

The financial services technology company is based in Jacksonville, Fla.

IBM notes stable

International Business Machines’ 3.5% notes due May 15, 2029 traded on Friday mostly unchanged in the 106 bps area, a market source said.

IBM sold $3.25 billion of the 10-year notes (A1/A/A) on May 8 as part of a $20 billion eight-tranche offering at a spread of 105 bps over Treasuries.

The company is an information technology and computer company based in Armonk, N.Y.

Bristol-Myers flat

Bristol-Myers Squibb’s 3.4% senior notes due July 26, 2029 traded flat on the day at 97 bps bid, according to a market source.

Bristol-Myers sold $4 billion of the 10-year notes (A2/A+/) on May 7 at a Treasuries plus 105 bps spread.

The notes priced as part of a $19 billion nine-tranche offering.

Bristol-Myers Squibb is a biopharmaceutical company based in New York.

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