High-grade market quiet after strong supply; steady volume forecast; Citigroup, IHS firm

By Cristal Cody

Tupelo, Miss., July 20 – Activity in the high-grade bond markets quieted on Friday following more than $33 billion of issuance over the week.

Bank and financial supply dominated the primary market with new paper from companies including Mitsubishi UFJ Financial Group, Inc., JPMorgan Chase & Co., Wells Fargo Bank NA, Citibank, NA, Bank of America Corp., U.S. Bank NA and M&T Bank Corp.

Looking ahead to the upcoming week, about $20 billion to $25 billion of investment-grade bonds are expected to print, according to syndicate sources.

In the secondary market, new issues were trading mostly better.

Bank paper was trading flat to as much 10 basis points tighter on Friday.

Citigroup Inc.’s $2.5 billion of 30-year notes priced at the start of the week improved 10 bps in the secondary market.

In other secondary trading, IHS Markit Ltd.’s $1.25 billion of senior notes priced in two tranches on Thursday firmed about 5 bps to 9 bps.

The Markit CDX North American Investment Grade 30 index ended mostly unchanged on the day at a spread of 62 bps.

For the week ended July 18, Lipper US Fund Flows reported inflows of $2.02 billion for corporate investment-grade funds, up from $814 million of reported inflows in the prior week.

Looking at broader fund flows that includes corporates, Treasuries, mortgages and agencies, inflows to U.S. high-grade funds and ETFs climbed to $2.34 billion for the past week, up from a $2.01 billion inflow last week, according to a BofA Merrill Lynch research note released on Friday.

“Flows to other fixed income asset classes improved as well, with the exception of high yield and global EM bonds,” BofA Merrill Lynch analyst Yuri Seliger said in the note. “The increase in high grade inflows was entirely due to short-term funds and ETFs, where inflows rose to $1.42 [billion] from $1.1 [billion] in the prior week.”

Outside of short-term, inflows were unchanged at $910 million. The majority of flows over the past week came from funds, at $1.83 billion, compared ETFs, which had flows of $500 million, Seliger said. In the previous week, the bulk of flows, $1.58 billion, was from ETFS, while funds had flows of $430 million last week, according to the note.

Citigroup firms

Citigroup’s $2.5 billion of 4.65% notes due July 23, 2048 tightened to 160 bps bid, 157 bps offered in the secondary market, a source said.

Citigroup (Baa1/BBB+/A) sold $2.5 billion of the notes on Monday at a spread of Treasuries plus 170 bps, on the tight side of initial guidance in the Treasuries plus 185 bps area.

The financial services company is based in New York.

IHS Markit tightens

IHS Markit’s 4.125% notes due Aug. 1, 2023 tightened to 138 bps bid in secondary trading, a source said.

The company (Ba1/BBB-/BBB) sold $500 million of the five-year notes on Thursday at a spread of Treasuries plus 145 bps.

The company’s $750 million of 4.75% notes due Aug. 1, 2028 improved to 190 bps bid.

The notes priced in the previous session at a Treasuries plus 195 bps spread.

IHS Markit is a London-based business information and analytics company.

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