Morning Commentary: Citigroup offers fixed-to-floaters; light supply eyed for week ahead

By Cristal Cody

Tupelo, Miss., Oct. 23 – Additional high-grade bank supply is expected to hit the primary market on Friday.

Citigroup Inc. announced a global offering of fixed-to-floating rate senior notes due in October 2024 (A3/BBB+/A) on Friday with proceeds slated for affordable housing financing or refinancing.

Corporate issuers have priced more than $15 billion of deals this week, surpassing the $15 billion of supply expected for the week.

Citigroup’s deal joins other bank supply priced this week and in the same session a week ago following the release of third-quarter earnings reports.

On Oct. 16, Bank of America Corp. brought $8.5 billion of medium-term senior notes (A2/A-/A+) in five tranches, and Morgan Stanley (A2/BBB+/A) sold $1 billion of five-year global medium-term fixed-to-floating rate senior notes.

Kicking off financial supply this week, Canadian Imperial Bank of Commerce sold $500 million of five-year green senior notes (A2/BBB+/AA-) on Monday.

On Wednesday, Royal Bank of Canada priced $2.25 billion of three-year senior medium-term bail-inable notes (A2/A/AA) in two tranches.

During Thursday’s session, Synovus Bank (Baa2/BBB/BBB) sold $200 million of 10-year fixed-to-floating rate subordinated notes, while Paccar Financial Corp. (A1/A+) priced a $100 million add-on to its 1.8% medium-term notes due Feb. 6, 2025.

Looking ahead to next week, syndicate sources predict issuance will remain light with numerous companies still in earnings-related blackout periods.

About $15 billion of new high-grade bond supply is forecast for the week ahead, sources said.

Inflows increase

Meanwhile, inflows into U.S. investment-grade bond funds and ETFs rose to $8.89 billion for the past week ended Wednesday from $8.65 billion in the week prior, according to a BofA Securities, Inc. research note released on Friday.

The gain was led by ETF inflows improving to $3.65 billion from $3.39 billion a week ago and by short-term inflows rising to $2.84 billion this week from $2.49 billion in the prior week.

The inflows were partially offset by a decline to $5.24 billion from $5.26 billion for funds inflows and a decline to $6.05 billion this past week from $6.15 billion in the prior week for excluding short-term inflows, according to the report.

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