Morning Commentary: High-grade supply quiet after steady volume; flows strong on Fed buys

By Cristal Cody

Tupelo, Miss., May 22 – High-grade deal volume quieted on Friday ahead of the early market close in what may be the quietest deal session seen since February.

The financial markets will close early at 2 p.m. ET on Friday and reopen on Tuesday.

Volume has been strong leading up to the Memorial Day holiday with AT&T Inc. pricing $12.5 billion of notes in five tranches on Thursday.

More than $52 billion of investment-grade bonds have priced week to date, outpacing forecasts of about $30 billion to $40 billion of supply for the week.

Meanwhile, high-grade bond fund and ETF inflows have remained strong on the back of the Federal Reserve’s secondary market corporate credit facility purchase of U.S. corporate credit ETFs that began on Tuesday, according to a BofA Securities, Inc. research note released Friday.

U.S. investment-grade bond and ETF inflows, including for corporate bonds, Treasuries, agencies and mortgages, declined slightly to $7.6 billion for the past week ending Wednesday compared to $7.8 billion of inflows in the prior week.

High-grade ETF inflows rose to $4.4 billion from $3.04 billion a week ago, while credit fund inflows fell to $3.2 billion from $4.76 billion, according to the note.

Short-term high-grade inflows fell to $2.91 billion for the past week from $3.58 billion in the prior week, though inflows to high-grade excluding short-term rose to $4.69 billion from $4.22 billion a week earlier.

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