Morning Commentary: High-grade primary quiets after busy week; inflows remain positive

By Cristal Cody

Tupelo, Miss., Sept. 21 – The investment-grade primary market quieted on Friday following more than $34 billion of issuance over the week.

Supply came in higher than expected with market sources forecasting about $25 billion to $30 billion of volume.

Month to date, supply has been strong in the high-grade primary market with more than $124 billion of bonds priced.

For the week ended Sept. 19, Lipper US Fund Flows reported inflows of $1.02 billion for corporate investment-grade funds, down from inflows of $3.22 billion in the prior week.

In the fixed-income market, inflows fell to $1.96 billion from $4.83 billion in the previous week and were led by weaker inflows for high-grade, including corporates, agencies, Treasuries and mortgages, and government bonds, Yuri Seliger, a BofA Merrill Lynch analyst, said in a note released on Friday.

High-grade inflows excluding short term declined to $600 million from $1.57 billion in the previous week, according to the note.

Short-term high-grade inflows fell to $570 million from $1.31 billion a week ago.

“The weaker flows are largely driven by funds, where flows declined for the second consecutive week,” Seliger said.

Flows declined from a $1.84 billion inflow for the week ended Sept. 5 to a $700 million inflow for the week ended Sept. 12 and to a $710 million outflow this week, according to the note.

Flows remained positive for high-grade ETFs with a $1.22 billion inflow for the week compared to a $2.18 billion inflow in the prior week, Seliger said.

In other action on Friday, International Flavors & Fragrances Inc. (Baa3/BBB) is expected to continue a two-day roadshow for a dollar-denominated multiple-tranche offering of notes, according to a market source.

The company priced a €1.1 billion two-part offering of euro-denominated senior notes on Thursday to pay a portion of the merger costs to acquire Frutarom Industries Ltd.

Elsewhere in the secondary market, trading has been busy with $22.31 billion of high-grade bonds traded on Thursday, up from $19.83 billion on Wednesday, $20.61 billion on Tuesday and $15.71 billion on Monday, according to Trace data.

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