Light high-grade bond supply eyed for holiday week; new issue concessions widen

By Cristal Cody

Tupelo, Miss., Oct. 7 – Market action slowed on Friday ahead of the long holiday weekend with an eye toward a fairly quiet short week ahead.

About $10 billion to $15 billion of investment-grade bond issuance is anticipated in the Oct. 10 week as focus turns to September inflation data due out Oct. 13, sources said.

That could be on the high side of estimates after this week saw a little more than $13 billion of issuance following a burst of deal volume on Thursday, according to market sources.

Issuance was in line with market expectations for the week, but supply came with hefty new issue concessions, sources said.

New issue concessions widened more than 10 basis points on average to more than 25 bps this week, a source said.

The $4 billion four-part offering of sustainability notes (Baa1/BBB+) priced Thursday from Enel Finance America LLC/Enel Finance International NV came with new issue concessions of more than 70 bps on the three-year notes and 43 bps on the five-year tranche, sources said.

The tranches priced 15 bps tighter than talk.

Volume for the week came in stronger than the meager $1.7 billion of issuance in the previous week as September closed.

About $75 billion of investment-grade corporate bond volume is expected to price in October.

Funds, ETF outflows jump

Meanwhile, outflows came down from the steep outflows seen in the prior week.

Investment-grade corporate investment fund and ETF outflows slowed to $1.89 billion for the week ended Wednesday from $8.19 billion in the prior week and $4.54 billion a week earlier, according to a BofA Securities note released Friday.

“However, given the big increase in interest rates in September, we should continue to see outflows in October,” BofA noted.

Outflows from funds declined to $4.1 billion this week from $6.58 billion the previous week but were still up from $3.23 billion a week earlier.

ETFs saw inflows of $2.21 billion for the week following outflows of $1.61 billion in the previous week and $1.31 billion of outflows in the week prior.

ETF flows are usually driven more by institutional investors and dealer activity, BofA noted.

Short-term high-grade outflows fell to $650 million over the week from $1.51 billion in the previous week and $1.18 billion in the prior week.

Excluding short-term outflows also dropped to $1.23 billion this week from $6.68 billion in the previous week and $3.36 billion in the prior week.

Investment-grade corporate funds also reported lower outflows of $3.54 billion for the past week ended Wednesday, down from $10.3 billion in the previous week and $4.97 billion a week earlier, according to Refinitiv Lipper US Fund Flows.

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