Morning Commentary: Ontario eyes primary market; Morgan Stanley firms; flows improve

By Cristal Cody

Tupelo, Miss., Jan. 18 – At least one issuer is expected to price new investment-grade notes during Friday’s session.

The Province of Ontario is marketing a dollar-denominated offering of five-year global notes with initial price talk in the mid-swap plus 38 basis points area. The notes are registered with the Securities and Exchange Commission.

BofA Merrill Lynch, CIBC World Markets Corp., HSBC Securities (USA) Inc. and Morgan Stanley & Co. LLC are the bookrunners.

Ontario joins the Province of Alberta and the Government of Canada in bringing dollar-denominated supply this week. Alberta priced $1.75 billion of five-year global bonds on Tuesday and Canada sold $3 billion of three-year global notes on Thursday.

Issuance week to date totals more than $33 billion from new corporate and sovereign, supranational and agency bonds and includes more than $25 billion of corporate volume.

New issues have traded mostly tighter in the secondary market.

Morgan Stanley’s $3 billion of 4.431% global medium-term fixed-to-floating rate senior notes due Jan. 23, 2030 that priced Thursday tightened about 10 bps, a source said.

The notes priced at par to yield a spread of Treasuries plus 170 bps.

The coupon will reset to a floating rate of Libor plus 162.8 bps from Jan. 23, 2029 to but excluding the maturity date.

Secondary market volume was heavy on Thursday with $26.78 billion of high-grade bonds traded, compared to $23.86 billion on Wednesday, $23.14 billion on Tuesday and $18.03 billion on Monday, according to Trace.

Meanwhile, flows improved marginally for the high-grade space over the week ended Jan. 16, according to a BofA Merrill Lynch note released on Friday.

Inflows to high grade, which includes corporates, agencies, Treasuries and mortgages, rose to $57 million from $26 million in the prior week.

Short-term high grade “flipped to the more typical net buying” of $79 million this week from net selling of $1.19 billion a week earlier, BofA Merrill Lynch strategist Yuri Seliger said in the report.

High-grade funds had $80 million in inflows after a $1.54 billion outflow in the previous week.

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