Valley National prices; steady volume eyed for June; funds, ETFs post inflows; bonds firm

By Cristal Cody

Tupelo, Miss., May 29 – The high-grade primary market mostly quieted on Friday with just one reported issuer, sources report.

Valley National Bancorp (/BBB-/Kroll: BBB/DBRS: BBB) priced $115 million of 10-year fixed-to-floating-rate subordinated notes.

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

May high-grade volume came to $252.44 billion as supply remained heavy for a third consecutive month. In the same month a year ago, just $114.8 billion of high-grade bonds were priced, according to Prospect News data.

The heavy supply pushed issuance past the $1 trillion mark in May.

Year to date, $1.06 trillion of high-grade bonds have priced, nearly double the $546.56 billion of volume brought to the market in the same period last year.

Looking ahead to next week, deal volume is projected to range in the $30 billion to $35 billion area, market sources said.

June supply is expected to remain active with about $125 billion of issuance forecast but cool from the record-breaking volume posted since March.

In other activity on Friday, Ralph Lauren Corp. continued 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.

Inflows climb

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 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.

On Thursday, Refinitive Lipper US Fund Flows reported investment-grade corporate fund inflows totaled $7.5 billion for the past week ended Wednesday, up from inflows of $5.33 million in the previous week and $5.25 billion in the prior week.

“Investors should expect inflows over the coming quarters,” according to a BNP Paribas research note released Friday. “The ultimate wall of money is QE, which will likely boost inflows into most fixed income assets over the coming quarters, but credit benefitting disproportionately.”

Bonds tighten

High-grade bonds were mixed but seen mostly improving this week and on Friday, sources said.

Boeing Co.’s senior notes (Baa2/BBB/) priced in $25 billion seven-part offering on April 30 traded better than issuance on Friday in heavy volume.

The company’s 5.15% notes due May 1, 2030 climbed to 107.52 on the day from a 106 handle on Thursday.

Boeing priced $4.5 billion of the 10-year notes at par to yield a Treasuries plus 450 bps spread.

The $750 million of 3.148% senior notes due June 4, 2030 that Yara International ASA (Baa2/BBB/) sold on Thursday 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.

New financial paper also has continued to improve in secondary trading.

Wells Fargo & Co.’s $6 billion two-part offering of fixed-to-floating-rate notes (A2/A-/A+) that priced Tuesday traded nearly 10 bps tighter across both tranches.

The company’s $3.25 billion tranche of 2.393% notes due June 2, 2028 improved to 181 bps bid and were last seen heading out at the 101.00 price area.

The eight-year notes priced at par to yield a spread of Treasuries plus 187.5 bps, tighter than talk in the 215 bps over Treasuries area.

Santander Holdings USA, Inc.’s $1 billion of 3.45% senior notes due June 2, 2025 (Baa3/BBB+/BBB+) were seen in heavy trading at the 101 area and about 12 bps tighter than issuance at 303 bps bid.

The notes priced on Wednesday at 99.804 to yield 3.493% and a spread of 315 bps over Treasuries. Initial talk was in the Treasuries plus 350 bps area.

The Markit CDX North American Investment Grade 33 index headed out modestly tighter on Friday at a spread of 77.59 bps.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.