Morning Commentary: Supply thins; Valley National on tap; bond funds, ETFs post inflows

By Cristal Cody

Tupelo, Miss., May 29 – The high-grade primary market mostly quieted early Friday with just one reported issuer offering bonds over the morning.

Valley National Bancorp (BBB-) plans to price 10-year fixed-to-floating rate subordinated notes after holding fixed income investor calls on Tuesday and Wednesday, a source said.

More than $33 billion of high-grade issues have priced week to date, beating market forecasts of about $25 billion to $30 billion of issuance over the week.

In other activity on Friday, Ralph Lauren Corp. will continue to hold fixed income investor calls that began on Thursday. The company was last in the primary market with an offering of senior notes (A2/A-) in 2018.

Meanwhile, U.S. bond fund and ETFs “reported inflows across the board,” BofA Securities, Inc. credit strategist Yunyi Zhang said in a note released Friday.

“U.S. credit continues to be the frontrunner” in the week’s flows, Zhang said.

Investment-grade inflows, including corporates, mortgages, agencies and Treasuries, rose to $8.49 billion for the past week ended Wednesday, up from $7.6 billion in the previous week. The increase was led by ETFs at $5.25 billion from $4.4 billion a week ago.

Funds inflows edged up to $3.24 billion from $3.2 billion in the previous week, while excluding short-term flows, inflows increased to $5.56 billion this past week from $4.69 billion, according to the report.

Short-term inflows were slightly higher on the week at $2.93 billion from $2.91 billion a week earlier.

In other action, new bonds priced in Rule 144A and Regulation S deals on Thursday tightened in secondary trading, a source said.

The $750 million of 3.148% senior notes due June 4, 2030 that Yara International ASA (Baa2/BBB) sold firmed to 238 bps bid.

Yara priced the notes at a spread of 245 bps over Treasuries, tighter than initial talk in the Treasuries plus 300 bps area and guidance in the Treasuries plus 255 bps area, plus or minus 5 bps.

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