Investment-grade deal volume thins; light post-holiday issuance likely; fund inflows return

By Cristal Cody

Tupelo, Miss., April 6 – Deal volume disappointed in the high-grade corporate space, while supply in the sovereign, supranational and agencies primary market awoke on $13.75 billion of transactions.

Only about $9 billion of corporate bonds priced, far short of the $15 billion to $20 billion range expected, as high-grade spreads widened by midweek, sources said.

No deals were expected Thursday or Friday, according to market sources.

The bond markets will close early Friday for the Good Friday holiday with traders and investors keeping an eye out for the release of the Labor Department’s March employment report, sources said.

“A disappointing jobs number may convince the Fed to rethink its interest rate strategy,” according to a Confluence Investment Management note on Thursday. “Over the last few weeks, Fed officials have appeared less committed to raising rates.”

In post-Easter market activity, supply is expected to remain light with only about $10 billion to $15 billion of issuance anticipated in the week ahead, sources said.

Volume likely will be front-loaded before the Consumer Price Index inflation gauge is released on Wednesday.

Bank earnings are expected to be in focus by the end of next week with reports due April 14 from Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo Securities, LLC and continuing into the following week from other major U.S. banks.

Some deals that did price this week ended up disappointing, while others performed stronger than anticipated, according to market sources.

MassMutual Global Funding II dropped a matching three-year floating-rate tranche to its FA-backed three-year fixed-rate offering on Tuesday.

During the same session, Jackson National Life Global Funding priced a five-year FA-backed senior secured note on top of initial talk.

Meanwhile, Pilgrim’s Pride Corp. sold $1 billion of high-grade 6.25% notes due 2033 (BBB-/BBB-) 37.5 basis points tighter than initial talk during Tuesday’s session. The bonds priced at a spread of Treasuries plus 300 bps.

Realty Income’s $1 billion two-part offering (A3/A-) on Thursday tightened 15 bps from initial talk in both tranches, while Micron Technology Inc.’s $1.5 billion of notes (Baa3/BBB-) firmed only 5 bps from initial talk.

The SSA space kicked off April with four new deals over the week, including from the Province of Quebec, totaling $13.75 billion and all pricing 2 bps tighter than initial talk.

Corporate inflows

Corporate investment-grade funds posted inflows of $1.79 billion for the past week ended Wednesday, according to Refinitiv Lipper US Fund Flows data.

In the prior week, funds had outflows of $881 million.

More bond fund “inflows are coming,” according to a BofA Securities research note.

“HG bond fund flows tend to follow returns with about a month lag,” the note said. “That means the big rally in bond prices during March should generate a significant acceleration in inflows during April. We have already seen an improvement in daily flows data over the past week, and March returns imply inflows accelerating to some of the highest pace in over a year.”

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