High-grade supply starts to wind down for year; thin volume eyed for holiday week

By Cristal Cody

Tupelo, Miss., Nov. 18 – High-grade bond issuers wasted no time in pricing more than $23 billion of notes in three sessions over the week and closing in on $75 billion of volume so far in November.

Deal enthusiasm waned by late in the week with issuers staying out of the primary market on Thursday and one standing down on Friday, sources said.

About $25 billion of new supply was expected by market participants for the week.

The week’s deal total got a significant bump from a $6 billion five-tranche offering of notes (A2/A-) from Philip Morris International Inc. on Tuesday.

The bonds tightened about 4 basis points to more than 10 bps across the capital structure of two-, three-, five-, seven- and 10-year tranches, a source said.

The $1.25 billion of 5.625% notes due 2029, which priced at a Treasuries plus 180 bps spread, were last seen trading in the secondary market at 167 bps offered.

With the holiday season approaching fast, not much issuance is expected in the week ahead with market sources forecasting only about $5 billion of primary supply, if any, in front of the Thanksgiving Day holiday.

Any deal volume for the week likely will be front-loaded, a source said.

November got off to a sleepy start until the past two weeks saw an uptick in pricing action, including more than $45 billion of bonds sold in the prior week.

About $75 billion to $85 billion of new issuance was expected in November.

Supply in December is expected to be mostly limited to the front half of the month.

Outflows eyed

High-grade corporate investment funds posted outflows of $895 million for the past week ended Wednesday, according to Refinitiv Lipper US Fund Flows.

Corporate investment-grade funds have a net outflow of nearly $117 billion year to date.

High-grade funds and ETFs saw a $380 million inflow for the past week ended Wednesday after posting a $740 million outflow the previous week, according to a BofA Securities Inc. note released Friday.

The investment-grade net flow over the past four weeks is mostly flat at $70 million with ETF inflows of $3.94 billion, up from $3.43 billion a week earlier, offsetting outflows from funds of $3.56 billion, up from $4.17 billion in the prior week.

Short-term high-grade outflows rose to $1.53 billion from $940 million, while excluding short-term inflows climbed to $1.91 billion this week from $200 million the previous week, according to the note.

Fund flows are expected to remain weak over November and improve in December, BofA said.

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