Strong high-grade supply expected in week ahead; new issues firm; inflows heavy

By Cristal Cody

Tupelo, Miss., May 12 – Deal volume is expected to ramp up in the high-grade bond primary market in the week ahead, sources reported Friday.

About $30 billion or more of new paper is forecast to print with no major economic data or Federal Reserve decisions on the calendar that could hamper supply.

The minutes from the Fed’s May rate hike meeting will be released on Wednesday.

Investment-grade supply this week pushed past $33 billion, not including Honeywell International Inc.’s $1.75 billion two-part deal on Friday.

Honeywell’s deal priced 15 basis points tighter than initial talk across both tranches, a source said.

The notes (A2/A) also were stronger in the secondary market Friday afternoon.

Honeywell’s two tranches were trading about 2 bps to 5 bps tighter.

The largest tranche, a $1 billion offering of 4.5% notes due 2034, firmed to 113 bps bid, a source said.

Honeywell sold the notes at a spread of Treasuries plus 115 bps. Talk was at the Treasuries plus 130 bps area.

Issuers including Apple Inc., Merck & Co. Inc. and T-Mobile USA Inc. helped lead the week’s investment-grade bond supply.

Volume was in line with about $30 billion to $35 billion of new issuance forecast for the week.

Apple’s $5.25 billion five-part offering of notes (Aaa/AA+) that priced on Monday headed out Friday mostly tighter, a source said.

The $1.5 billion tranche of 4% notes due 2028 were quoted at 46 bps bid.

Apple sold the notes at a spread of 55 bps over Treasuries, tighter than talk at the 80 bps spread area.

Inflows climb

Elsewhere, inflows climbed to $1.43 billion this past week ended Wednesday, according to Refinitiv Lipper US Fund Flows.

Inflows had resumed in the prior week with a $322 million total after posting $1.32 billion of outflows a week earlier.

High-grade funds and ETFs overall saw slower inflows over the week.

Inflows to U.S. high-grade funds and ETFs declined to $2.1 billion for the week ended Wednesday from a $3.96 billion inflow in the previous week, according to a BofA Securities Inc. research note.

High-grade funds inflows softened to $430 million from $2.89 billion of inflows in the week prior.

Inflows into ETFs were stronger at $1.66 billion for the week, up from $1.07 billion of inflows in the prior week, BofA said.

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