Morning Commentary: SoCal Edison eyes market; Pfizer, Merck bonds mixed; inflows decline

By Cristal Cody

Tupelo, Miss., March 8 – High-grade supply quieted on Friday after a strong week of bond issuance that totaled about $40 billion.

Volume surpassed market expectations of about $25 billion to $30 billion of new issuance for the week on deals that included Pfizer Inc.’s $5 billion five-part offering of senior notes on Monday, Merck & Co., Inc.’s $5 billion of notes sold in four tranches on Tuesday and Dell Technologies Inc.’s $4.75 billion three-part deal on Wednesday.

In market activity expected on Friday, Southern California Edison Co. (A3/A-/A) plans to hold fixed income investor calls, a source said.

Barclays, J.P. Morgan Securities LLC, PNC Capital Markets, LLC and Wells Fargo Securities LLC are the arrangers.

Southern California Edison is a Rosemead, Calif.-based electric utility company and subsidiary of Edison International.

In the secondary market, new issues from Merck and Pfizer were mixed, a source said. Pfizer’s notes traded as much as 5 basis points tighter to about 4 bps wider. Merck’s notes were quoted wrapped around issuance to about 1 bp softer.

Secondary market volume totaled $23.7 billion on Thursday, according to Trace data.

The Markit CDX North American Investment Grade 31 index eased about 1 bp to close the previous session at a spread of 63 bps.

For the week ended March 6, Lipper US Fund Flows reported inflows declined to $1.99 billion for corporate investment-grade funds from $3.9 billion in the prior week.

Inflows to U.S. high-grade mutual funds and ETFs remained strong at $4.68 billion for the week ended Wednesday, compared with a $5.01 billion inflow in the previous week, Yunyi Zhang, a credit strategist with BofA Merrill Lynch, said in a report released on Friday.

The inflow to high-grade funds increased to $4.24 billion from $3.54 billion in the previous week, while the inflow to high-grade ETFs dropped to $440 million from $1.47 billion.

Meanwhile, the maturity breakdown of high-grade inflows “remained about evenly split” between short-term, at $2.55 billion from $2.70 billion, and excluding short-term, at $2.13 billion from $2.31 billion, Zhang said.

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