Owl Rock upsizes; steady deal supply forecast; AutoZone, Lowe’s mixed; inflows strong

By Cristal Cody

Tupelo, Miss., April 5 – High-grade issuers sold more than $15 billion of bonds over the week, compared to about $20 billion of supply forecast.

Deal volume is expected to remain steady but lighter in the coming weeks until companies exit earnings blackout reporting periods, sources report.

About $15 billion to $20 billion of high-grade supply is forecast for the week ahead.

The Markit CDX North American Investment Grade 32 index improved about 1 basis point on Friday to close at a spread of 60 bps.

In the primary market on Friday, Owl Rock Capital Corp. priced an upsized $400 million of five-year senior notes more than 12 basis points tighter than initial talk.

In the secondary market, bonds were mixed, according to market sources.

AutoZone, Inc.’s $750 million of senior notes (Baa1/BBB/BBB) priced in two parts on Thursday traded wrapped around issuance to about 2 bps softer.

Lowe's Cos., Inc.’s $3 billion of notes (Baa1/BBB+) priced in two parts on Wednesday were mixed.

Inflows strong

Elsewhere, U.S. fund and ETF investors increased bond purchases for the past week ended April 3 to $8.95 billion, the second biggest inflow of the year and the seventh biggest on record, according to a BofA Merrill Lynch research report released on Friday.

In the previous week, investors purchased $4.02 billion of bonds.

“Flows follow returns and hence it is not surprising that the drop in interest rates this year is attracting stronger bond inflows,” credit strategist Yuri Seliger said. “All major fixed income asset classes saw stronger flows this past week with the exception of munis and global EM bonds.”

Inflows to the high-grade space, including corporates, Treasuries, agencies and mortgages, jumped to $6.32 billion this past week from $3.71 billion a week earlier, according to the note.

“This past week's inflow was also the second biggest this year and the fifth biggest on record,” Seliger said.

Buying was strong for short-term high-grade, up to $2.45 billion from $760 million a week ago, and for excluding short-term, which rose to $3.87 billion from $2.95 billion.

Much of the increase relative to the prior week was attributed to funds, up to $4.43 billion from $2.17 billion a week ago, while inflows to ETFs, which are more dominated by institutional investors, increased by a smaller margin to $1.89 billion from $1.54 billion, Seliger said.

Owl Rock prices

Owl Rock Capital priced an upsized $400 million of five-year senior notes (Baa3/BBB-/BBB-) on Friday tighter than talk at a spread of Treasuries plus 312.5 bps, according to a market source and a 497AD filing with the Securities and Exchange Commission.

Initial price talk was in the Treasuries plus 325 bps spread area.

The notes priced at 99.179 to yield 5.439%.

The deal was upsized from $300 million.

BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC, RBC Capital Markets, LLC, SG Americas Securities LLC, SunTrust Robinson Humphrey Inc., Deutsche Bank Securities Inc., ING Financial Markets LLC and Wells Fargo Securities LLC were the bookrunners.

The middle-market debt and equity asset management company is based in New York City.

AutoZone flat to softer

AutoZone’s 3.125% notes due April 18, 2024 traded on Friday at 87 bps bid, 85 bps offered, according to a market source.

The $300 million tranche priced Thursday at a spread of 87 bps over Treasuries.

AutoZone’s $450 million of 3.75% notes due April 18, 2029 were quoted in secondary trading at 129 bps bid, 127 bps offered.

The notes priced at a spread of 127 bps plus Treasuries.

AutoZone is a Memphis-based auto parts and supplies retailer.

Lowe’s notes mixed

Lowe's 3.65% notes due April 5, 2029 were in the secondary market during the session at 116 bps bid, 114 bps offered, a source said.

Lowe’s sold $1.5 billion of the notes on Wednesday at a spread of Treasuries plus 115 bps.

A $1.5 billion tranche of 4.55% notes due April 5, 2049 firmed to 162 bps bid, 159 bps offered.

Lowe’s sold the notes at a spread of Treasuries plus 165 bps.

The home improvement company is based in Mooresville, N.C.

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