Morning Commentary: High-grade market action quiet; thin volume forecast pre-holiday

By Cristal Cody

Tupelo, Miss., Aug. 24 – Little activity is expected over Friday’s session in the high-grade bond market.

Week to date, nearly $10 billion of investment-grade corporate bonds have priced, in line with syndicate forecasts of about $5 billion to $10 billion of supply.

Looking ahead, even less volume is predicted for the upcoming week.

The week ahead is forecast to see zero supply to up to $5 billion of new issuance with the deal calendar expected “to stay relatively quiet till more investors return from the beach post Labor Day,” BofA Merrill Lynch analysts said in a note released Friday.

High-grade secondary market volume also has thinned over the week with $13.08 billion of bonds traded on Thursday, down from $15.99 billion on Wednesday, $15.60 billion on Tuesday and $13.39 billion on Monday, according to Trace data.

Early Friday, the bond markets were mostly quiet with investor attention on Federal Reserve chairman Jerome Powell’s speech at the Federal Reserve Bank of Kansas City’s annual economic policy symposium in Jackson Hole, Wyo.

As previously reported, for the week ended Aug. 22, Lipper US Fund Flows reported inflows of $2.68 billion, up from $1.45 billion of inflows reported in the prior week.

Overall high-grade inflows, which includes corporates, mortgages, agencies and Treasuries, declined to $2 billion for the week ended Wednesday from $2.07 billion as the decline in fund inflows to $970 million from $1.52 billion “more than offset the improvement in ETF inflows” to $1.03 billion from $560 million, according to the BofA Merrill Lynch note.

Short-term high-grade reported weaker inflows of $1.39 billion from $1.95 billion, while high-grade outside-of-short-term posted $620 million of inflows, up from $120 million in the prior week.

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