Strong high-grade deal pace to close out February; funds, short-term inflows higher

By Cristal Cody

Tupelo, Miss., Feb. 23 – February is expected to close out with another week of busy investment-grade bond issuance.

High-grade supply blew past $60 billion this week on the back of hefty bond deals from AbbVie Inc., Cisco Systems Inc., AstraZeneca Finance LLC and other issuers.

Investment-grade issuers priced over $60 billion of notes in just four sessions after the long Presidents Day weekend, including a $6.9 billion six-tranche offering on Friday from Solventum Corp.

In the week ahead, sources report they expect the active deal pace to continue with about $35 billion to $40 billion of additional supply anticipated to hit the primary market.

So far this month, more than $135 billion of high-grade notes have priced, sources said.

“Investor demand for new debt coming to market is likely strong because it is widely believed that the Federal Reserve will lower interest rates in the coming months,” according to a Fitch Ratings high-grade market report. “Fitch currently expects the Fed’s first rate cut to be in July, with the policy rate ending 2024 at 4.75%, compared to a 5.25%-5.5% target range currently.”

The benchmark 10-year Treasury note yield gave back 6 basis points on Friday to end at 4.26%.

The investment-grade bond market had $5.6 trillion outstanding at Dec. 31, up 14% from the prior year, according to Fitch.

As of Dec. 31, $759 billion, or 14%, of the $5.6 trillion U.S. investment-grade bond market, will mature in 2024 and 2025, with $332 billion due in 2024 and $427 billion due 2025, Fitch estimates.

ETF inflows lower

Weekly inflows in short-intermediate corporate investment-grade debt funds/ETFs totaled $2.29 billion in the period ended Wednesday, up slightly from $2.28 billion a week earlier, according to Refinitiv Lipper U.S. Fund Flows.

Net inflows year to date total over $13 billion.

Flows into high-grade bond funds and ETFs focused on high-grade corporates, agencies, mortgages and Treasuries declined to $2.96 billion for the week ended Wednesday from $4.7 billion in the prior week, according to a BofA Securities note.

Investment-grade fund inflows rose to $1.99 billion over the week from $1.91 billion of inflows a week ago.

High-grade ETF inflows declined to $970 million from a $2.8 billion inflow in the previous week, BofA said.

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