Morning Commentary: Investment-grade primary market quiet; short-term inflows decline

By Cristal Cody

Tupelo, Miss., March 22 – The high-grade primary market stayed quiet at the start of Friday’s session with no reported issuers.

More than $18 billion of bonds have priced week to date, compared to market forecasts of about $20 billion to $25 billion of issuance.

Inflows for the overall high-grade space, including corporate bonds, Treasuries, agencies and mortgages, moderated to $3.78 billion for the week ended March 20 from $5.1 billion in the previous week, according to a BofA Merrill Lynch research note released on Friday.

“The decline was completely due to short-term high grade,” BofA Merrill Lynch credit strategist Yuri Seliger said in the note.

Short-term high-grade inflows fell to $840 million from $2.36 billion in the prior week.

Meanwhile, inflows excluding short-term net buying rose to $2.94 billion for the past week from $2.47 billion a week earlier.

Inflows to high-grade funds declined to $2.16 billion for the week ended Wednesday from $2.58 billion in the prior week, according to the report.

Looking at the secondary market, Valero Energy Corp.’s $1 billion of 4% senior notes due April 1, 2029 that priced on Thursday improved 5 basis points, a market source said.

The San Antonio-based oil refinery owner and operator priced the notes at a spread of 155 bps over Treasuries.

Secondary market volume this week included $23.88 billion of high-grade bonds traded on Thursday, $24.29 billion on Wednesday, $23.22 billion on Tuesday and $19.10 billion on Monday, according to Trace.

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