Lighter volume forecast amid potential Fed rate hike; AvalonBay eases; Campbell mixed

By Cristal Cody

Tupelo, Miss., March 16 – The primary market stayed quiet on Friday and light volume is expected in the week ahead on a potential Federal Reserve rate hike.

About $20 billion of bond supply is forecast in the upcoming week, according to market sources.

The Federal Reserve will hold a two-day policy meeting that ends on Wednesday.

Several issuers are in the deal pipeline, sources report.

Assurant Inc. (Baa2/BBB+/) continued a second day of fixed-income investor calls through 12 p.m. ET Friday for a three-tranche bond offering, a source said. The investor calls began on Thursday.

The company plans to price five- and 10-year notes and one tranche of 30-year fixed-to-floating-rate subordinated notes.

High-grade corporate issuers priced over $20 billion of bonds for the week, compared to the $30 billion to $35 billion of supply initially expected by market sources.

Softer demand and wider concessions along with widening spreads in the secondary market kept issuance light after more than $14 billion of bonds priced on Monday, market sources said.

AvalonBay Communities, Inc.’s 4.35% medium-term notes due April 15, 2048 priced in the previous session traded 2 basis points weaker on Friday.

Campbell Soup Co.’s $5.3 billion notes (Baa2/BBB/) priced in seven tranches on Monday were mixed on Friday, with the five-year and longer maturities trading about 3 bps to 11 bps wider on the bid side.

Standard Chartered plc’s $1.75 billion of notes placed in two tranches on Monday widened about 10 bps in the secondary market, a source said.

The Markit CDX North American Investment Grade 29 index firmed 1 bp on Friday to close at a spread of 54 bps.

AvalonBay softens

AvalonBay Communities’ 4.35% notes due April 15, 2048 traded on Friday at 132 bps bid, 130 bps offered, a market source said.

The company sold $300 million of the 30-year notes (A3/A-/) on Thursday at a spread of 130 bps over Treasuries.

The manager and developer of apartment communities is based in Arlington, Va.

Campbell notes mixed

Campbell Soup’s $650 million tranche of 3.3% notes due April 15, 2021 firmed to 88 bps bid, 85 bps offered in secondary trading, according to a market source.

The notes were sold at a spread of 90 bps over Treasuries.

Campbell Soup’s 4.15% notes due March 15, 2028 were quoted on Friday at 141 bps bid, 137 bps offered. The notes were seen on Wednesday at 137 bps offered.

The $1 billion tranche of 10-year notes priced in Monday’s sale at a spread of 130 bps over Treasuries.

Campbell Soup is a convenience foods company based in Camden, N.J.

Flows improve

In other action, flows for U.S. funds and ETFs were strong for stocks and bonds for the week ended March 14, Yuri Seliger, an analyst with BofA Merrill Lynch, said in a note released on Friday.

High-grade bond flows rebounded to a $2.41 billion inflow from a flat $40 million inflow in the prior week, Seliger said, citing data from EPFR Global and BofA Merrill Global Research.

“High grade flows improved across the board,” he said.

Short-term flows improved to $950 million from $150 million, and out of short-term flows rose to $1.46 billion from a negative $110 million.

Flows for both funds improved to $2.46 billion from a $1.01 billion inflow and ETFs to a $50 million outflow from a $970 million outflow, according to the note.

As previously reported, investment-grade corporate funds saw a $2.32 billion net inflow for the week to March 14, more than reversing the $740 million net outflow figure seen the previous week, according to sources familiar with the fund-flow statistics generated by AMG Data Services Inc.

This week’s funds influx raises the year-to-date net inflow figure for the investment-grade corporates to $22.62 billion from last week’s $20.29 billion, setting a new peak level for the year so far.

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