Morning Commentary: High-grade primary quiets; flows weaken; CBS, Prudential flat

By Cristal Cody

Tupelo, Miss., Feb. 22 – Investment-grade bond market primary action slowed early Friday after heavy volume this week.

No reported issuers were marketing deals at the start of the session.

High-grade issuers have priced more than $26 billion of corporate bonds week to date, beating market forecasts of about $20 billion to $25 billion of supply.

Investment-grade flows were weaker over the Presidents Day holiday week.

“U.S. mutual fund and ETF flows weakened for all asset classes during this past holiday-shortened week ending February 21,” Yunyi Zhang, a credit strategist with BofA Merrill Lynch, said in a report released on Friday.

Investment-grade inflows slowed to $990 million from $2.64 billion in the previous week. Inflows were driven by a $1.12 billion outflow from ETFs and mitigated by $2.1 billion of inflows to funds, Zhang said.

Short-term high grade saw $710 million of inflows this week following $1.17 billion of inflows a week ago, according to the report.

High-grade excluding short term saw a bigger decline to $270 million this week from $1.48 billion a week earlier.

In other market activity, Woodside Finance Ltd. will continue the second day of a two-day roadshow and fixed income investor calls on Friday for a dollar-denominated offering of notes.

New issues priced this week were mixed in the secondary market, a source said.

CBS Corp.’s $500 million of 4.2% guaranteed senior notes due June 1, 2029 (Baa2/BBB/BBB) that priced on Wednesday at a spread of 167 basis points over Treasuries were quoted wrapped around issuance.

Prudential Financial, Inc.’s $1 billion 4.35% medium-term notes due Feb. 25, 2050 also were unchanged from issuance. The notes (Baa1/A) priced Wednesday at a spread of 137 bps over Treasuries.

Secondary trading volume was heavy along with the strong issuance on Thursday with $24.1 billion of bonds traded, compared to $23.98 billion on Wednesday and $24.29 billion on Tuesday, according to Trace data.

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