Front-loaded high-grade bond supply targeted ahead of Fed decision; funds inflows shrink

By Cristal Cody

Tupelo, Miss., March 15 – The avalanche of high-grade bond issuance seen year to date and so far in March is expected to slow with focus turning to the Federal Reserve’s rate decision in the week ahead.

Still, the primary market will be plenty active with sources estimating about $25 billion to $30 billion of investment-grade supply in the upcoming week, most of it front-loaded ahead of the Fed’s monetary policy meeting.

Deal volume is expected to slow over the remainder of March, but sources said they expect strong issuance into May.

Corporate deal volume came in at over $37 billion for the past week and was nearing $90 billion month to date.

March issuance overall was pegged to total around $135 billion.

Financial supply was strong this week with issuers including Australia & New Zealand Banking Group Ltd., M&T Bank Corp., Banco Santander SA, Goldman Sachs Bank USA/New York and Nordea Bank Abp in the primary market.

Bank of Ireland Group plc’s $1 billion of 5.601% notes due 2030 (A3/BBB) tightened 7 basis points to 135 bps bid in the secondary market, a source said.

The bank priced the notes on Wednesday at a spread of 142 bps over Treasuries, tighter than talk at the 170 bps spread area.

High-grade supply has been heavy year to date with more than $450 billion of corporate bonds already priced and some of the supply in February and March driven by funding needs related to mergers and acquisitions, sources said.

High-grade M&A supply totals $57 billion so far in 2024, according to a BofA Securities research note.

U.S. M&A action has jumped over 60% to $388.2 billion from over 2,000 deals year to date, according to a report from London Stock Exchange Group plc’s LSEG Data & Analytics on Thursday.

The week’s top global M&A deals announced included Equitrans Midstream Corp.’s $5.5 billion stock acquisition by EQT Investments Holdings LLC.

M&A activity year to date has been highest by dollar volume in financials with $102.2 billion this year, up 164%, LSEG said.

The pipeline of deals with potential funding needs in the U.S. investment-grade market increased to $428 billion in February from $331 billion at the end of 2023, which usually corresponds to about $120 billion in M&A-related supply over the next eight months, according to the BofA note.

Occidental Petroleum Corp.’s acquisition of junk-rated CrownRock LP valued at $12 billion is expected to close in the first quarter and include over $9 billion of new debt financing, a source said.

ETF inflows climb

Inflows in high-grade bond funds and ETFs focused on high-grade corporates, agencies, mortgages and Treasuries declined this week ended Wednesday to $4.17 billion from $8.81 billion of inflows in the prior week, according to a BofA note.

High-grade ETF inflows climbed to $4.4 billion this week ended Wednesday from $2.56 billion a week earlier, while investment-grade funds had outflows of $240 million after a $6.25 billion inflow a week ago.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.