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Morning Commentary: Investment-grade bond market action quiet; inflows highest since October
By Cristal Cody
Tupelo, Miss., Jan. 5 – Market activity remained quiet early Friday with no reported supply after a winter snowstorm that froze most of the eastern portion of the United States and hit New York on Thursday kept bond issuance light in the previous session.
High-grade volume has been steady since the markets opened for the New Year and is expected to continue at a hefty pace through the month.
Inflows to investment-grade bonds increased while flows for stocks turned negative in the first week of 2018, according to a research note from BofA Merrill Lynch analyst Yuri Seliger.
“Inflows into U.S. bond high grade funds and ETFs recovered this past week from a holiday-related slowdown a week earlier,” Seliger said. “In fact inflows to the all fixed income category reached $5.88 [billion] – the highest weekly inflow since October – and up from a $0.42 [billion] outflow in the prior week.”
Inflows to high grade rose to $3.24 billion from $500 million, according to the note.
“After three weekly consecutive outflows from short-term high grade, including $0.58 [billion] in the prior week, flows turned positive this past week with an inflow of $0.41 [billion],” Seliger said.
Market participants otherwise were focused on economic data over the morning, including the Labor Department’s December jobs report. Non-farm payrolls came in at 148,000, compared to economists’ forecasts of 195,000.
In the investment-grade secondary bond market, $14.41 billion of bonds were traded on Thursday, compared to $15.36 billion on Wednesday and $11.87 billion on Tuesday, according to Trace.
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