Investment-grade supply may slow with SVB fallout; corporate flows turn positive

By Cristal Cody

Tupelo, Miss., March 10 – Investment-grade supply came in on the high side of expectations for the week with about $40 billion of bonds priced.

About $30 billion to $40 billion of new investment-grade corporate paper was anticipated over the week, market sources said.

March so far is off to a strong start with about $55 billion of notes already priced month to date.

At least $150 billion of total high-grade deal volume is forecast to print in March.

But that could change starting next week with the fallout from SVB Financial Group’s Silicon Valley Bank closure by federal regulators Friday and its once high-grade paper sinking to the single digits going into the weekend, sources reported.

Volatility reared its head with the CBOE Volatility index up nearly 30% over Thursday’s and Friday’s sessions.

Market sources said high-grade bond supply likely will slow next week to about $25 billion of new issuance.

Fund, ETF inflows drop

Elsewhere, corporate investment-grade funds turned positive with $717 million of inflows over the past week ended Wednesday, according to Refinitiv Lipper US Fund Flows.

In the prior week, there were $238 million of outflows.

Year to date, net inflows into corporate investment-grade funds totals $15.3 billion, a source said.

Inflows to U.S. high-grade funds and ETFs dropped to $610 million over the past week ended Wednesday from a $4.75 billion inflow in the previous week, BofA Securities Inc. analysts said in a note released Friday.

Investment-grade fund flows were negative for the first time in seven weeks with $180 million of outflows this week following a $2.22 billion inflow a week earlier.

“Flows tend to follow returns, which means outflows from funds should continue following the big increase in interest rates in February,” the note said.

High-grade ETF inflows slowed to $790 million from $2.53 billion in the prior week.

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