Morning Commentary: High-grade corporate supply quiet; inflows decline; AT&T strong

By Cristal Cody

Tupelo, Miss., Dec. 20 – The week is closing out with no high-grade corporate bonds priced and little activity expected for the remainder of 2019.

No issuance is forecast in the upcoming week, sources report.

The bond markets will close early on Tuesday and remain closed on Wednesday for the Christmas Day holiday.

Investment-grade corporate deal volume month to date totals more than $20 billion, market sources said.

Inflows to high-grade bond funds and ETFs declined to $970 million for the past week ended Wednesday, according to a BofA Global research note released on Friday.

“This follows four consecutive weeks of very strong inflows, including a $5.07 [billion] inflow in the prior week,” the note said.

Flows increased for high-grade ETFs to $1.97 billion from $1.41 billion in the prior week, but turned negative for funds and short-term high grade.

Funds reported a $1 billion outflow following a $3.66 billion inflow in the previous week, according to the report.

Short-term high-grade outflows came to $1.14 billion this past week after a $1.37 billion inflow a week earlier.

Inflows excluding short-term declined to $2.11 billion from $3.7 billion.

On Thursday, Lipper US Fund Flows reported that corporate investment-grade funds posted outflows of $180 million for the past week ended Wednesday, compared to inflows of $4.61 billion in the previous week and $2.23 billion in the prior week.

In other activity, AT&T Inc.’s 4.35% global senior notes due March 1, 2029 (Baa2/BBB/A-) were among the most actively traded high-grade issues in the secondary market on Thursday, Trace data shows.

The notes are ending the year much better than issuance.

Early Friday, AT&T’s 4.35% notes improved to 111.00 in secondary trading after closing the previous session at 110.98.

On Thursday, the notes were last seen 5 basis points tighter at 110 bps bid, a market source said.

AT&T sold $3 billion of the 10-year notes on Feb. 13, 2019 in line with guidance at 99.508 and a spread of Treasuries plus 170 bps.

Overall corporate high-grade trading volume this week has included $19.08 billion of bonds traded on Thursday, $20.64 billion on Wednesday, $20.44 billion on Tuesday and $18.87 billion on Monday, according to Trace data.

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