High-grade issuers find deal windows; Comcast, Meta widen; inflows into funds, ETFs up

By Cristal Cody

Tupelo, Miss., May 5 – Investment-grade bond issuers managed to price more than $28 billion of notes over a volatile week that saw the collapse and fire sale of First Republic Bank to JPMorgan Chase & Co. with more supply expected Friday.

About $25 billion to $30 billion of deal volume was anticipated.

Several issuers stood down during the week as regional banks weighed on the financial markets, according to market sources.

The bulk of the paper priced this week was trading wider, too, sources reported.

The week’s biggest deals from Comcast Corp. and Facebook owner Meta Platforms Inc. softened in the secondary market.

Comcast’s $5 billion four-tranche offering of notes (A3/A-/A-) that priced Monday eased about 3 basis points to 5 bps. The largest tranche, the $1.6 billion of 5.35% 30-year notes, eased 5 bps to 160 bps offered in trading.

The notes due 2053 priced Monday at 155 bps over Treasuries, tighter than talk at the 180 bps spread area.

Meta Platforms’ $8.5 billion five-part offering of senior notes (A1/AA-) brought at the start of the week were trading in the secondary market about 3 bps to 10 bps wider.

The deal’s largest tranche, $2.5 billion of 5.6% 30-year notes, eased 6 bps to 183 bps offered. The notes priced at a spread of 177 bps over Treasuries, tighter than talk in the 200 bps spread area.

Bank paper and equity improved Friday after an upbeat report from the Labor Department showed that 253,000 jobs were added in April, better than an expected 185,000 increase.

The unemployment rate declined to a seasonally adjusted 3.4%, lower than a 3.6% rate expected and the lowest rate since May 1969, market sources said.

Western Alliance Bancorp and PacWest Bancorp improved on Friday after the banks’ paper and shares dove midweek in renewed pressured following First Republic Bank’s collapse.

The KBW Regional Banking index moved up 4.68% on Friday to 82.38.

The SPDR S&P Regional Banking ETF also was up 6.29% at $38.35 by the day’s end.

Stocks rallied on Friday after staying soft since the Federal Reserve’s rate hike on Wednesday.

The S&P 500 index closed up 1.85%.

The CBOE Volatility index declined 14.44% by the close to 17.19.

Moody’s Analytics said in a report Thursday that it expects the Federal Reserve to pause rate hikes at June’s monetary policy meeting.

“We do not anticipate the first rate cut to occur until early 2024,” Moody’s said. “While it is Pollyannish to think we are in the clear, the failure of First Republic Bank, which had been on the radar since SVB’s collapse, is more likely a delayed consequence of the initial panic than an emerging vulnerability in the banking system.”

Strong front-loaded high-grade supply is expected to hit the primary market in the week ahead, sources said.

Issuers will be keeping an eye on the Consumer Price Index inflation data report due out before the markets open Wednesday.

About $30 billion to $35 billion of high-grade bond volume is anticipated over the week.

Corporate funds see inflows

Inflows returned over the past week ended Wednesday with corporate investment-grade funds inflows of $322 million, following $1.32 billion of outflows in the prior week, according to Refinitiv Lipper US Fund Flows.

Inflows to U.S. high-grade funds and ETFs also improved over the past week ended Wednesday to $3.96 billion from an $800 million inflow a week earlier, BofA Securities Inc. analysts said in a note.

High-grade funds inflows climbed to $2.89 billion this week from $580 million in the prior week, while ETF inflows also moved up to $1.07 billion from $220 million of inflows a week ago.

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