Lighter IG issuance eyed as market digests week’s $62 billion of deals; ETF inflows up

By Cristal Cody

Tupelo, Miss., May 19 – A big slowdown in primary action is expected in the May 22 week while the market digests the more than $62 billion of investment-grade bonds priced this week.

Volume came in at more than double what was expected, thanks to Pfizer, Inc.’s $31 billion eight-tranche deal brought Tuesday, sources reported.

About $30 billion of issuance was expected, though there was talk of a major issuer in the wings to possibly print before the U.S. debt ceiling deadline in June.

“Pfizer's fourth-largest $31bn bond deal was met with $85bn in orders – as good an example as it gets that the IG market is properly functioning,” according a BofA Securities Inc. research note on Friday.

Pfizer’s paper was trading anywhere from about 3 basis points to more than 10 bps better in the secondary market after pricing, a source said.

By the end of the week, Pfizer’s notes were still tighter with the tranches about 2 bps to 12 bps better on the bid side, a market source said.

The $4 billion tranche of 4.45% notes due 2028 (A1/A+) went out at 83 bps bid, 78 bps offered.

Pfizer sold the notes at a spread of 95 bps over Treasuries, better than talk at the 115 bps spread area

About $15 billion to $20 billion of high-grade deal volume is anticipated in the primary market in the May 22 week, sources said.

April inflows soar

Corporate investment-grade funds saw heavy inflows of $2.16 billion for the weekly period ended Wednesday, up from $1.43 billion in the prior week, according to Refinitiv Lipper US Fund Flows.

High-grade funds and ETFs also climbed over the week.

Inflows to U.S. high-grade funds and ETFs jumped to $3.46 billion for the week ended Wednesday from a $2.1 billion inflow in the prior week, according to a BofA Securities Inc. research note.

ETF inflows climbed to $3.96 billion from $1.66 billion a week earlier.

Flows into high-grade funds turned negative with $500 million of outflows, down from $430 million of inflows in the previous week.

April high-grade fund and ETF flows finished with a $17.3 billion inflow, compared to just $1.5 billion of inflows in March, BofA said.

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