IG bond issuance hits summer slowdown; pipeline thin through Labor Day; ETF flows positive

By Cristal Cody

Tupelo, Miss., Aug. 25 – New high-grade bond issuance stayed sparse as expected over the late August summer week.

The corporate space saw just $3.45 billion of bonds price, while the sovereign, supranational and agencies space picked up with over $10 billion of new issuance.

Corporate volume was in line with market forecasts that called for only up to about $5 billion of investment-grade deals for the week.

Light primary activity is expected until following the Labor Day holiday in September.

Next week’s deal levels are likely to be about the same or quieter with many already out for late summer vacations, sources report.

Charles Schwab Corp. led this week’s supply with a $2.35 billion two-part offering of senior notes (A2/A-) that broke about 1 basis point to 2 bps tighter in the secondary market, sources said. The company dropped a three-year floating-rate tranche from the final offering.

Schwab’s $1 billion of 5.875% notes due 2026 firmed to 113 bps offered in secondary trading.

The tranche priced at a spread of 115 bps over Treasuries, 25 bps tighter than initial talk.

Three-year paper made up the bulk of the week’s three corporate deals with Pricoa Global Funding I and Pacific Life Global Funding II also pricing three-year tenors.

Corporate outflows higher

Corporate high-grade fund net outflows rose to $984 million for the week ended Wednesday, according to Refinitiv Lipper US Fund Flows.

Outflows were up from $575 million in the prior week.

Meanwhile, flows turned positive this week in high-grade funds and ETFs, including corporates, agencies and Treasuries, BofA Securities analysts reported in a note released Friday.

Inflows totaled $560 million for the week ended Wednesday following a $1.09 billion outflow in the prior week.

The increase came from $790 million of inflows into high-grade ETFs after a $1.08 billion outflow last week, BofA said.

Investment-grade funds continued to see outflows and ended the week with a $230 million outflow, up from a $20 million outflow in the prior week.

Short-term high-grade outflows waned to $1.16 billion this past week from $1.57 billion of outflows a week earlier, according to the report.

Inflows to excluding short-term high-grade jumped to $1.72 billion this week from $470 million a week ago.

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