Morning Commentary: High-grade primary quiets; fixed income flows slow; Experian better

By Cristal Cody

Tupelo, Miss., Dec. 6 – Investment-grade bond supply quieted on Friday as market focus over the morning swung to the Labor Department’s strong November jobs report.

During the month, employment rose by 266,000 jobs, while the unemployment rate was little changed at 3.5%.

Market analysts had expected 180,000 jobs to be added in November and an unemployment rate of 3.6%.

Elsewhere, for the past week ended Wednesday, overall inflows to U.S. high-grade funds and ETFs declined to $4.69 billion from $6.62 billion in the previous week and $5.51 billion in the week prior, according to a BofA Securities, Inc. research note released Friday.

Last week, the markets were shortened by the Thanksgiving Day holiday.

The “levels are notably above” the $3.4 billion weekly average year to date, while the cumulative three-week $16.8 billion inflow was the largest since October 2014, Yuri Seliger, a credit strategist with BofA Securities, said in the note.

Overall fixed income inflows “normalized” to $5.63 billion from a high $9.35 billion inflow a week earlier as flows declined for high-grade securities, government bonds and municipal bonds, Seliger said.

Broader inflows to the U.S. high-grade space, including corporate bonds, mortgages, agencies and Treasuries, were up slightly at $3.51 billion for the past week from a $3.39 million inflow in the previous week.

Short-term high-grade inflows declined to $1.15 billion from $1.49 billion in the previous week, while excluding short-term inflows slowed to $3.54 billion from $5.13 billion.

Week to date, high-grade issuers have priced more than $15 billion of bonds.

About $15 billion to $20 billion of issuance was expected by syndicate sources for the week.

New issues are trading mostly better in the secondary market, a source said.

Experian Finance plc’s 2.75% senior notes due March 8, 2030 (Baa1/A-) have tightened about 5 basis points from where the issue priced on Tuesday.

Experian sold $750 million of the notes at a spread of 115 bps over Treasuries.

Overall corporate secondary market volume this week totaled $20.32 billion on Thursday, $21.68 billion on Wednesday, $19.98 billion on Tuesday and $20.74 billion on Monday, according to Trace data.

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