Morning Commentary: High-grade bond activity slows; financials firm; Goldman improves

By Cristal Cody

Tupelo, Miss., Feb. 15 – The high-grade primary market stayed mum at the start of Friday’s session ahead of a three-day holiday weekend in the United States.

Deal volume has been heavy this week with more than $38 billion of investment-grade bonds priced, beating market forecasts of about $25 billion to $30 billion of issuance.

Supply is expected to continue to remain strong in the holiday-shortened week ahead.

The U.S. bond markets will be closed on Monday for Presidents Day.

Meanwhile, inflows to the high-grade space, which includes corporates, agencies, mortgages and Treasuries, was moderate for the week ended Feb. 13, according to a BofA Merrill Lynch note released on Friday.

“Buying of U.S. high grade funds and ETFs decelerated to $2.64 [billion] for this past week ending on Feb. 13, down from the [No.] 4 biggest inflow on record of $6.51 [billion] a week earlier,” Yuri Seliger, a credit strategist with BofA Merrill Lynch, said in the report.

Inflows to short-term high grade declined to $1.17 billion from $1.68 billion, while inflows to high-grade excluding short-term slid to $1.48 billion from $4.83 billion.

Flows declined to $950 million from $3.97 billion for high-grade funds and to $1.69 billion from $2.45 billion for ETFs, according to the note.

As previously reported, for the week ended Feb. 13, Lipper US Fund Flows reported inflows of $1.89 billion for corporate investment-grade funds, compared to inflows of $2.67 billion in the previous week and $34 million in the prior week.

Looking at the secondary market, bank and financial paper priced this week has traded about 1 basis point to 5 bps tighter than issuance, a source said.

Goldman Sachs Group Inc.’s $1.5 billion of 3.625% senior notes due Feb. 20, 2024 sold on Wednesday improved about 1 bp in secondary trading.

Goldman Sachs (A3/BBB+/A) priced the notes at a spread of Treasuries plus 112.5 bps.

Price guidance was in the Treasuries plus 115 bps area, plus or minus 2.5 bps.

Corporate high-grade secondary trading volume this week included $22.95 billion of issues on Thursday, $24.2 billion on Wednesday, $22.04 billion on Tuesday and $18.94 billion on Monday, according to Trace data.

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