Strong high-grade volume forecast for May; Capital One mixed; Bacardi notes mostly soft

By Cristal Cody

Tupelo, Miss., April 27 – The investment-grade bond market headed out mostly quiet on Friday ahead of expected heavy deal volume in May.

Syndicate sources forecast about $25 billion of new issuance in the upcoming week.

About $130 billion to as much as $150 billion of investment-grade bond supply is predicted for May.

New issues were mixed in the secondary market on Friday.

Capital One Financial Corp.’s $2 billion of senior notes (Baa1/BBB/A-) priced in the previous session traded flat to about 2 basis points wider.

Bacardi Ltd.’s $2.6 billion of guaranteed notes (Ba1/BBB-/BBB-) brought to the market in four tranches on Tuesday remained mostly softer.

In other secondary trading, Amazon.com, Inc.’s 3.15% notes due Aug. 22, 2027 were flat after improving on Thursday.

The Markit CDX North American Investment Grade 30 index closed steady at a spread of 60 bps.

Capital One mixed

Capital One Financial’s 4.25% notes due April 30, 2025 eased to 132 bps bid, 129 bps offered in secondary trading, according to a market source.

The company sold $750 million of the notes on Thursday at a Treasuries plus 130 bps spread.

Capital One is a McLean, Va.-based financial services company.

Bacardi eases

Bacardi’s 4.7% notes due May 15, 2028 traded on Friday at 176 bps bid, 172 bps offered, a market source said.

The company sold $800 million of the 10-year notes on Tuesday at a Treasuries plus 175 bps spread.

Bacardi’s 5.3% bonds due May 15, 2048 were weaker at 220 bps bid, 216 bps offered in the secondary market.

The notes priced in $700 million tranche with a Treasuries plus 215 bps spread.

Bacardi is a privately-held spirits company based in Hamilton, Bermuda.

Amazon.com tightens

Amazon.com’s 3.15% notes due Aug. 22, 2027 (Baa1/AA-/) were unchanged in the 78 bps bid area on Friday after tightening 6 bps in the previous session following a better-than-expected earnings report, according to a market source.

Amazon.com sold $3.5 billion of the notes on Aug. 15, 2017 at a spread of Treasuries plus 90 bps.

The retailer and online commerce company is based in Seattle.

Inflows increase

While U.S. fund and ETF flows weakened for risk assets including stocks, high-yield and emerging markets bonds for the week ended April 25, inflows increased for “safer asset classes such as high grade and government bonds,” Yuri Seliger, an analyst with BofA Merrill Lynch, said in a note released on Friday.

“The overall impact on overall fixed income was a decline in inflows to $3.12 [billion] from $4.36 [billion],” he said, citing data from EPFR Global and BofA Merrill Lynch Global Research.

High-grade inflows rose to $3.33 billion from $860 million in the prior week, according to the note.

Inflows increased to $1.16 billion this week from $260 million in the previous week for short-term high grade and to $2.17 billion from $60 million outside of short term.

“Most of the increase was from ETFs that tend to be dominated by institutional investors,” Seliger said.

ETF inflows rose to $2.48 billion from $38 million in the previous week.

Inflows to funds increased to $850 million for the week ended Wednesday from $470 million in the prior period.

For the week ended April 25, Lipper US Fund Flows reported inflows of $2.01 billion for corporate investment-grade funds, up from inflows of $1.54 billion reported for the week ended April 18.

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