Slower corporate high-grade deal supply on tap for July; new paper firms; inflows drop

By Cristal Cody

Tupelo, Miss., June 30 – Corporate issuers priced more than $14 billion of high-grade bonds in the week ended Friday and about $90 billion over the month.

Volume mostly came in line with market forecasts of about $10 billion to $15 billion of supply for the week and about $100 billion of issuance forecast for June.

A major slow-down in the primary market is expected in July, sources reported.

New deal action post-Fourth of July likely will only total about $5 billion to $10 billion, if any, in the short week ahead with the early close on Monday and full closure on Tuesday, sources said.

For July, some sources said they are anticipating about $75 billion of new high-grade corporate paper to print.

However, the month could surprise to the upside.

July volume could hit the $85 billion to $95 billion range, similar to issuance for the month in the prior two years, according to a BofA Securities research note.

“IG supply has been running close to trend over the past few months, and we look for that to continue as key risks have declined while higher yields have not had a noticeable impact on issuer appetite to borrow in June,” BofA said. “In fact, we are tracking 7% higher supply this year relative to 2022.”

Tighter spreads also could convince some issuers to tap the primary in the week ahead, according to market sources.

Investment-grade spreads firmed by late in the week with most new issues trading at least 1 basis point better than issuance, a source said.

Prologis LP’s $2 billion three-part deal that priced on Monday traded about 1 bp to 6 bps better in the secondary.

The $750 million tranche of 4.875% notes due 2028 (A3/A) tightened 5 bps by midweek and was last seen stronger at 99 bps bid.

The issue priced 25 bps better than talk at a spread of 105 bps over Treasuries.

Credit Agricole SA’s $2.5 billion three-part offering on Tuesday firmed about 4 bps to 9 bps by late in the week, a source said.

The largest tranche, $1.25 billion of 5.589% notes due 2026 (Aa3/A+), traded about 1 bp tighter after pricing and was last seen stronger at 116 bps bid.

The notes priced at a spread of 120 bps over Treasuries, better than talk at the 145 bps spread area.

The only new issue seen softer this week was the $300 million deal from Connecticut Light and Power Co., doing business as Eversource Energy, on Monday, a source said.

The 4.9% first and refunding mortgage bonds due 2033 (A1/A+/A+) traded 2 bps wider in the secondary. The notes priced at a spread of 120 bps over Treasuries, better than initial talk at the 145 bps over Treasuries area.

Corporate inflows soft

Corporate investment-grade fund inflows continued to decline over the week, dropping to $919 million for the week ended Wednesday from $2.17 billion in the previous week and $4 billion the week prior, according to Refinitiv Lipper US Fund Flows.

Net corporate fund inflows year to date total $24.27 billion, a source said.

U.S. high-grade fund and ETF inflows also were lower this week, according to a BofA Securities research note.

Inflows declined to $1.39 billion in the week ended Wednesday from $2.68 billion in the prior week and $2.74 billion a week earlier.

ETFs provided all the week’s inflows with $1.7 billion reported, down from $2.72 billion in the previous week and $1.97 billion the week prior, BofA said.

High-grade funds had outflows of $310 million, compared to $40 million of outflows in the previous week and a $770 million inflow a week earlier.

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