Morning Commentary: Inflows up across maturities; Bank of America, Morgan Stanley firm

By Cristal Cody

Tupelo, Miss., July 19 – The high-grade primary market quieted at the start of Friday’s session with more than $14 billion of bonds priced week to date.

About $25 billion to $30 billion of supply was expected by market sources this week.

Volume has been concentrated in the financial sector following the release of second-quarter earnings reports from companies including Morgan Stanley, Bank of America Corp. and PNC Financial Services Group, Inc.

Meanwhile, inflows were stronger this week for high-grade funds, according to a research note released on Friday from BofA.

High-grade purchases, including for bonds, Treasuries, agencies and mortgages, climbed to $3.67 billion in the week ended Wednesday from $2.25 billion a week ago.

Flows increased across maturities.

Short-term inflows rose to $1.37 billion from $910 million in the previous week, while inflows that excluded short-term debt increased to $2.3 billion from $1.33 billion last week, according to the report.

“Most of the increase in inflows came from high-grade ETFs [to $1.29 billion from $50 million in the prior week] rather than funds [which rose to $2.38 billion this week from $2.2 billion],” BofA credit strategist Yuri Seliger said in the report.

Elsewhere in the secondary market, bank and financial paper traded mostly tighter, a market source said.

Bank of America’s $2.5 billion of 3.194% fixed-to-floating rate senior notes due July 23, 2030 (A2/A-/A+) that priced on Thursday firmed about 2 basis points.

The notes priced at par to yield a spread of 113 bps over Treasuries.

The issue will convert July 23, 2029 to a floating rate of Libor plus 118 bps to but excluding the maturity date.

Morgan Stanley’s $2 billion of fixed-to-floating rate senior notes due July 22, 2025 that priced on Thursday also traded about 2 bps better than issuance in the secondary market.

Morgan Stanley (A3/BBB+/A) priced the 2.72% notes on Thursday at par to yield a spread of 90 bps over Treasuries.

The coupon will reset to a floating rate of SOFR plus 115.2 bps from July 22, 2024 to but excluding the maturity date.

Secondary trading volume totaled $18.46 billion on Thursday, compared to $19.01 billion on Wednesday, $20 billion on Tuesday and $14.88 billion on Monday, according to Trace.

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