High-grade primary market quiet, supply forecast; Charter remains tight; credit spreads firm

By Cristal Cody

Tupelo, Miss., July 6 – The high-grade primary market again stayed quiet on Friday, posting zero supply in the first week of July.

No corporate issuers reportedly priced bonds over the holiday-shortened week following heavy supply in mid-June, giving the market time to digest issuance that included two hefty bond deals from Walmart Inc. and Bayer AG, according to informed sources.

Deal action is expected in the upcoming week with syndicate sources forecasting about $15 billion to $20 billion of volume.

Investment-grade fund flows also declined over the holiday week.

For the week ended July 4, Lipper US Fund Flows reported inflows of $171 million for corporate investment-grade funds, down from $1.54 billion of reported inflows in the previous week.

According to a BofA Merrill Lynch research note released Friday, inflows to U.S. high-grade, which includes corporates, Treasuries, agencies and mortgages, fell to $71 million from $1.66 billion in the prior week.

“Most of the decline was in short-term high grade,” Yuri Seliger, a BofA Merrill Lynch analyst, said in the note.

Inflows fell to $75 million from $1.56 billion in the previous week, the note said.

Secondary trading also has been light, though some bonds are better bid and credit spreads tightened on Friday, sources report.

Charter Communications, Inc.’s senior secured notes (Ba1/BBB-/BBB-) priced in the prior week continued to trade better than issuance.

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