Light high-grade volume forecast; Charter, Penske new notes firm; funds inflows improve

By Cristal Cody

Tupelo, Miss., June 29 – High-grade primary action stayed quiet on Friday with desks thinning early ahead of the weekend and upcoming Independence Day holiday week.

Supply this week missed syndicate forecasts with more than $4 billion of investment-grade corporate bonds priced. Market sources had forecasted about $15 billion to $20 billion of volume with some predicting as little as $5 billion of new issuance for the week.

Even less is expected in the week ahead with an early market close on Tuesday and closed markets on Wednesday for the holiday.

Syndicate sources mostly expect zero issuance in the upcoming week but said a few deals could come with up to $5 billion of volume predicted. The month of July is expected to see about $75 billion to $85 billion of new bond supply.

An offering remains in the pipeline from Toyota Motor Credit Corp., which has held fixed-income investor calls over the week in the United States, Europe and Asia for three tranches of senior notes.

In the secondary market, new investment-grade bonds priced this week were mixed on Friday, a source said.

Charter Communications, Inc.’s $1.5 billion two-tranche offering of senior secured notes priced Thursday traded 4 basis points to 5 bps tighter.

Meanwhile, the 4.125% senior notes due Aug. 1, 2023 that Penske Truck Leasing Co., LP and PTL Finance Corp. sold on Tuesday were more than 2 bps better in the secondary market.

For the week ended June 27, Lipper US Fund Flows reported inflows of $1.54 billion for corporate investment-grade funds, up from $411 million of reported inflows in the prior week.

High-grade inflows improved to $1.66 billion from a $230 million outflow in the previous week, according to a BofA Merrill Lynch research note released Friday that cited data from EPFR Global and BofA Merrill Lynch Global Research and includes corporates, Treasuries, mortgages and agencies in the high-grade category.

“This was on the back of higher inflows to short-term high grade,” Yuri Seliger, a BofA Merrill Lynch analyst, said in the note.

Inflows to short-term high grade rose to $1.56 billion from $500 million a week earlier, while the current week posted a lack of outflows outside of short-term to $100 million from minus $730 million in the prior week.

All of the inflow of $2.5 billion from $110 million to high-grade was from ETFs, Seliger said.

Charter notes tighten

The $1.5 billion of senior secured notes (Ba1/BBB-/BBB-) notes that Charter Communications’ subsidiaries Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. priced in two tranches on Thursday remained better in secondary trading on Friday, according to a market source.

The tranche of floating-rate notes due Feb. 1, 2024 was quoted mostly unchanged on the day at 160 bps bid, 157 bps offered.

The $400 million tranche priced at par to yield Libor plus 165 bps.

Charter’s 4.5% notes due Feb. 1, 2024 firmed to 176 bps bid, 173 bps offered in the secondary market.

The notes traded on Thursday at 178 bps bid.

Charter sold $1.1 billion of the notes in the previous session at a Treasuries plus 180 bps spread.

The broadband communications company is based in Stamford, Conn.

Penske improves

Penske’s $500 million of 4.125% senior notes due Aug. 1, 2023 traded on Friday at 135 bps bid, 132 bps offered, a market source said.

The notes (Baa2/BBB/BBB+) were sold on Tuesday at a spread of 137.5 bps over Treasuries.

The global transportation services provider is based in Reading, Pa.

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