High-grade primary action quiet; light supply forecast for holiday week; bonds tighten

By Cristal Cody

Tupelo, Miss., April 12 – The investment-grade primary market remained quiet on Friday with light volume eyed for the week ahead.

Corporate issuers priced more than $8.5 billion of high-grade bonds over the week, not including several major emerging markets deals that printed.

Looking forward, syndicate sources forecast about $10 billion to $15 billion of supply with most volume front-loaded in the upcoming Good Friday holiday week. The bond markets will close early at 2 p.m. ET on Thursday and remain closed on April 19.

Desks are expected to be thinly staffed over the latter part of the holiday week, sources report.

Meanwhile, bank and financial issuance is being eyed following the release of earnings on Friday and next week, according to market sources.

JPMorgan Chase & Co. and Wells Fargo & Co. reported first-quarter earnings on Friday. On Monday, Citigroup Inc. and Goldman Sachs Group, Inc. release earnings reports, while Bank of America Corp. reports on Tuesday and Morgan Stanley releases its first-quarter earnings results on Wednesday.

The Markit CDX North American Investment Grade 32 index improved about 1 basis point on the day to a spread of 57 bps.

High-grade deal volume this week was led by Avolon Holdings Ltd.’s upsized $2.5 billion three-part sale of guaranteed senior notes on Thursday.

The company’s $750 million of 4.375% notes due May 1, 2026 were quoted about 1 bp better than issuance in secondary trading, a source said. Avolon sold the notes at a spread of 205 bps over Treasuries.

In other secondary trading, Charter Communications, Inc.’s 5.05% senior secured notes due March 30, 2029 firmed 5 bps on Friday, a source said.

Verizon Communications Inc.’s 3.875% senior notes due Feb. 8, 2029 also tightened about 5 bps during the session.

For the week ended April 10, Lipper US Fund Flows reported corporate investment-grade fund inflows rose to $3.47 billion from $2.9 billion in the previous week and $2.75 billion in the prior week.

Inflows to U.S. bond funds and ETFs declined for the past week to $2.87 billion from $8.95 billion a week earlier, according to a BofA Merrill Lynch research note released on Friday.

“The slowdown was broad-based, with most major fixed income asset classes reporting weaker flows, including high-grade, high-yield and government bonds,” BofA Merrill Lynch strategist Yuri Seliger said in the note. “Some of that money was apparently redirected to equities, where flows turned positive with a $2.66 [billion] inflow after a [$730 million] outflow in the prior week.”

Buying of high-grade bonds declined to $2.74 billion for the week ended Wednesday from $6.32 billion in the previous week.

“Investors actually turned small net sellers of short-term high grade,” Seliger said of a $150 million outflow, down from a $2.45 billion inflow a week earlier.

Flows remained positive for excluding short-term high-grade but declined to $2.89 billion this past week from $3.87 billion a week ago.

The slowdown in demand was mostly driven by funds, down to $1.42 billion from $4.43 billion, rather than ETFs, which declined to $1.32 billion from $1.89 billion, Seliger said.

Charter improves

Charter Communications’ 5.05% notes due March 30, 2029 (Ba1/BBB-/BBB-) traded 5 bps better on Friday at 185 bps bid, a market source said.

Company subsidiaries Charter Communications Operating, LLC and Charter Communications Operating Capital Corp. sold $1.25 billion of the notes on Jan. 14 at a spread of Treasuries plus 235 bps.

Charter is a Stamford, Conn.-based broadband communications company.

Verizon tightens

Verizon Communications’ 3.875% senior notes due Feb. 8, 2029 (Baa1/BBB+/A-) headed out on Friday about 5 bps tighter at 101 bps bid, according to a market source.

The company sold $1 billion of the notes on Feb. 5 at a spread of Treasuries plus 120 bps.

Verizon is a New York City-based telecommunications company.

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