Investment-grade primary action quiet; thin supply eyed for rest of month; inflows strong

By Cristal Cody

Tupelo, Miss., Aug. 27 – The high-grade primary market quieted on Thursday with light issuance expected for the rest of August and thin action expected ahead of the upcoming Labor Day holiday.

Market focus turned Thursday to Federal Reserve chairman Jerome Powell’s speech on monetary policy at the Federal Reserve Bank of Kansas City’s virtual Jackson Hole, Wyo., economic policy symposium.

Week to date, high-grade corporate issuers have priced about $17 billion of bonds, while sovereign, supranational and agency issuers brought $10 billion of bonds to the market this week.

About $15 billion to $20 billion of corporate deal volume was expected.

Market participants are mixed on September supply with some expecting a busy month and others anticipating a slowdown in issuance.

“Too much money, too few bonds,” BofA Securities, Inc. analysts said in a research note released on Thursday. “That could be the reality soon.”

BofA analysts now forecast August high-grade issuance of $150 billion, followed by $120 billion to $140 billion in September and another $100 billion in the fourth quarter.

Those estimates are “notably low as news about Covid-19 vaccines give industrial companies the confidence to start spending the $360 [billion] war chest of cash they built in 1H20, defending against Covid-19,” the analysts said.

Elsewhere, high-grade corporate funds inflows rose to $6.03 billion over the past week ended Wednesday from $5.13 billion in the previous week, according to Refinitive Lipper US Fund Flows.

The Markit CDX North American Investment Grade 33 index eased more than 1 basis point on Thursday to a spread of 67.63 bps.

In secondary trading, new issues this week have mostly improved, according to market sources.

Pricoa, Equitable firm

Pricoa Global Funding I’s $400 million of 0.8% funding agreement-backed notes due Sept. 1, 2025 (Aa3/AA-AA-) priced on Tuesday firmed to 53 bps bid.

The notes were priced at a spread of Treasuries plus 55 bps, tighter than talk in the Treasuries plus 65 bps area.

The upsized $500 million of 1.4% funding agreement-backed notes due Aug. 27, 2027 that Equitable Financial Life Global Funding (A2/A+/) priced on Tuesday improved about 2 bps to 93 bps bid.

The notes were priced at a spread of Treasuries plus 95 bps.

Initial price talk was in the Treasuries plus 110 bps area.

The deal was upsized from $300 million.

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