High-grade primary slows in last days of summer; new bonds mixed; flows turn negative

By Cristal Cody

Tupelo, Miss., Aug. 18 – Investment-grade bond supply slowed to just over $13 billion in the Aug. 14 week with fewer issuers expected during the rest of August as summer crawls to a close.

Deal volume missed expectations of about $20 billion of supply for the week.

Light primary activity is anticipated until September, though a few issuers may tap the primary market in the next two weeks, sources said.

Only up to about $5 billion of new high-grade paper is forecast for next week, according to market sources.

So far, high-grade corporate issuers have priced more than $64 billion of notes in August.

About $100 billion of new investment-grade paper was expected to print over the month.

Bonds were mixed this week in the secondary market with some new paper priced late in the week among the stronger performers, a source said.

New financial paper widened.

Bank of America Corp.’s $5 billion four-part offering of fixed and floating-rate notes (Aa1/A+) on Monday firmed about 1 basis point to 3 bps in aftermarket trading but was about 1 bp to 4 bps wider headed into the weekend, a source said.

Huntington Bancshares Inc.’s $1.25 billion of 6.208% fixed/floating-rate senior notes due 2029 (Baa1/BBB+/A-) that priced on Monday were trading about 3 bps wider at 188 bps offered earlier in the week but softened further by Friday, sources said. The notes were last seen trading at 191 bps bid, 187 bps offered.

The issue priced at par to yield a spread of 185 bps over Treasuries, tighter than talk at the 215 bps area.

PNC Financial Services Group Inc.’s $750 million of 5.939% fixed/floating-rate senior notes due 2034 (A3/A-/A) sold Tuesday widened to 178 bps bid, 174 bps offered, a source said.

The bonds priced at par to yield a spread of 173 bps over Treasuries. Talk was at the 195 bps over Treasuries area.

High-grade outflows

Corporate high-grade fund outflows totaled $575 million in the week ended Wednesday, according to Refinitiv Lipper US Fund Flows.

Year to date, corporate fund net inflows total $28.15 billion, a market source said.

Outflows also resumed in high-grade funds and ETFs with $1.09 billion reported this past week ended Wednesday following a $1.81 billion inflow last week, according to a BofA Securities research note.

The decline was attributed to high-grade ETF inflows turning negative with $1.08 billion of outflows this week after a $1.79 billion inflow a week earlier.

Investment-grade funds had a modest outflow of $20 million after a $3 million inflow in the prior week.

Outflows from short-term high grade increased to $1.57 billion this past week from $1.06 billion of outflows last week, while inflows to excluding short-term high grade declined to $470 million from $2.87 billion a week ago.

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