High-grade supply eyed at August start; Mid-America gives update; AT&T notes improve

By Cristal Cody

Tupelo, Miss., July 31 – The investment-grade primary market stayed quiet on Friday following better-than-expected deal volume over the week.

Nearly $25 billion of investment-grade issues were priced in the first four sessions, beating market forecasts of about $10 billion to $15 billion of supply this week.

Deal volume over July slowed from the record-setting levels posted since March, though year to date issuance of $1.32 trillion remains above year ago levels of $724.7 billion, according to Prospect News data.

Looking ahead to next week, August is expected to kick off with strong issuance for the first week, syndicate sources said.

About $25 billion to $35 billion or more of high-grade supply is forecast to print over the upcoming week.

August overall is expected to see about $60 billion to $70 billion of investment-grade issuance.

In other activity on Friday, Mid-America Apartments, LP (Baa1/BBB+/BBB+) held a virtual roadshow and fixed income investor calls, a source said.

Citigroup Global Markets Inc., Jefferies LLC, J.P. Morgan Securities LLC, U.S. Bancorp Investments, Inc. and Wells Fargo Securities LLC are the arrangers.

Mid-America Apartments was last in the high-grade primary market on Nov. 18 when it sold $300 million of 2.75% senior notes due March 15, 2030.

On Thursday, Washington Real Estate Investment Trust (Baa2/BBB/) held fixed income investor calls with possible issuance to follow, sources said.

Meanwhile, U.S. investment-grade bond fund and ETF inflows remained high at $9.03 billion for the past week ended Wednesday following a $9.42 billion inflow in the prior week, according to a BofA Securities, Inc. research note released on Friday.

High-grade fund inflows rose to $5.42 billion from $4.69 billion in the week earlier period.

Short-term high-grade inflows increased to $3.28 billion this past week from $2.45 billion, while excluding short-term flows fell to $5.76 billion from $6.97 billion.

ETF inflows also declined to $3.61 billion from $4.73 billion in the prior week.

Corporate fund inflows were up this past week at $7.9 billion from $7.75 billion in the previous week, according to Refinitive Lipper US Fund Flows.

Credit spreads modestly better

The Markit CDX North American Investment Grade 33 index ended Friday slightly tighter on the day at a spread of 69.33 basis points.

The PIMCO Investment Grade Corporate Bond Index closed up 0.18% at 117.28.

The iShares iBoxx Investment Grade Corporate Bond ETF gained 0.14% to 138.35.

In the secondary market, new issues priced this week were mixed, according to market sources.

AT&T Inc.’s $11 billion five-part offering of senior global notes (Baa2/BBB/A-) that priced on Monday improved by late in the week with the tranches tightening about 10 bps to 20 bps.

AT&T’s 1.65% notes due Feb. 1, 2028 were last seen at 101.89 and a spread at 100 bps bid.

The notes priced in a $2.25 billion tranche at 99.874 to yield 1.668%, or a spread of Treasuries plus 120 bps.

Initial price talk was in the Treasuries plus 150 bps area.

The company’s 2.25% notes due Feb. 1, 2032 improved to 102.57 and a 149 bps bid.

AT&T sold $2.5 billion of the notes at 99.819 to yield 2.268%, or a Treasuries plus 165 bps spread.

The notes were talked to print at the 185 bps over Treasuries area.

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