Morning Commentary: Owl Rock offers five-year notes; high-grade inflows strong; Lowe’s mixed

By Cristal Cody

Tupelo, Miss., April 5 – High-grade bond market participants eyed an issue expected to price over Friday’s session.

Owl Rock Capital Corp. plans to sell $300 million of five-year senior notes (Baa3/BBB-/BBB-) that were initially talked to price in the Treasuries plus 325 basis points spread area.

BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC, RBC Capital Markets, LLC, SG Americas Securities LLC and SunTrust Robinson Humphrey Inc. are the bookrunners.

The offering from the New York-based middle-market debt and equity asset management company is registered with the Securities and Exchange Commission.

Week to date, high-grade issuers have priced more than $15 billion of bonds, compared to about $20 billion of supply forecast.

U.S. fund and ETF investors increased bond purchases for the past week ended April 3 to $8.95 billion, the second biggest inflow of the year and the seventh biggest on record, according to a BofA Merrill Lynch research report released on Friday.

In the previous week, investors purchased $4.02 billion of bonds.

“Flows follow returns and hence it is not surprising that the drop in interest rates this year is attracting stronger bond inflows,” credit strategist Yuri Seliger said. “All major fixed income asset classes saw stronger flows this past week with the exception of munis and global EM bonds.”

Inflows to the high-grade space, including corporates, Treasuries, agencies and mortgages, jumped to $6.32 billion this past week from $3.71 billion a week earlier, according to the note.

“This past week's inflow was also the second biggest this year and the fifth biggest on record,” Seliger said.

Buying was strong for short-term high-grade, up to $2.45 billion from $760 million a week ago, and for excluding short-term, which rose to $3.87 billion from $2.95 billion.

Much of the increase relative to the prior week was attributed to funds, up to $4.43 billion from $2.17 billion a week ago, while inflows to ETFs, which are more dominated by institutional investors, increased by a smaller margin to $1.89 billion from $1.54 billion, Seliger said.

Elsewhere, in the secondary market, Lowe's Cos., Inc.’s $3 billion of notes (Baa1/BBB+), priced in two parts on Wednesday, were mixed, a source said.

The company’s notes traded about 2 basis points wider than issuance on the short end and 3 bps better on the long end.

Lowe’s sold $1.5 billion of 3.65% notes due April 5, 2029 at a spread of Treasuries plus 115 bps., on the tight side of guidance in the Treasuries plus 120 bps area, plus or minus 5 bps.

The Mooresville, N.C.-based home improvement company sold $1.5 billion of 4.55% notes due April 5, 2049 at a spread of Treasuries plus 165 bps. Price guidance was in the Treasuries plus 170 bps area, plus or minus 5 bps.

Secondary trading volume this week included $21.18 billion of issues on Thursday, $24.38 billion on Wednesday, $22.24 billon on Tuesday and $18.33 billion on Monday, according to Trace data.

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