High-grade primary market quiets; corporate inflows steady; December funds, ETF inflows solid

By Cristal Cody

Tupelo, Miss., Dec. 17 – The investment-grade bond market stayed quiet on Thursday with no reported issuers and little activity expected over the remainder of the year.

Just three companies have priced $2.28 billion of high-grade bonds week to date, including Rule 144A and Regulation S deals from Microchip Technology Inc. on Monday and Berry Global, Inc. on Tuesday and a registered offering from Fidus Investment Corp. on Wednesday.

Light issuance was expected this week and for the rest of the month with zero up to $10 billion of volume anticipated by market participants.

More than $42 billion of investment-grade bonds have priced so far in December, beating market forecasts of about $25 billion to $35 billion of volume for the month.

In January, pricing action is expected to pick up with about $125 billion to $135 billion of supply forecast.

Corporate flows stable

Investment-grade corporate fund inflows were mostly unchanged over the week ended Wednesday at $2,898,000, Refinitiv Lipper US Fund Flows said Thursday.

Corporate fund inflows totaled $2.9 billion in the prior week and $5.94 billion in the week previous.

Meanwhile, the pace of inflows to daily reporting U.S. investment-grade bond funds and ETFs “remains solid” at $1.1 billion a day on average in December so far, up from $1 billion in November, according to a BofA Securities, Inc. research note released on Thursday.

Final fund flows for November totaled $34 billion, down from $45.3 billion in October, according to the report.

Fund inflows declined to $24.4 billion in November from $32.7 billion in the previous month, while ETF inflows fell to $9.7 billion from $12.7 billion and short-term inflows dropped to $4.2 billion from $17.4 billion in October.

Excluding short-term inflows was the exception and rose to $29.9 billion in November from $27.9 billion in the prior month.

Cumulative year-to-date high-grade bond fund and ETF inflows through November total $253.7 billion, according to the note.

Market tone stayed positive on Thursday on continued Covid-19 stimulus talks and following the Federal Reserve’s monetary policy meeting that ended Wednesday with rates left unchanged.

The Markit CDX North American Investment Grade 35 index firmed to a spread of 52.48 basis points from 52.92 bps in the previous session.

The PIMCO Investment Grade Corporate Bond index improved 0.13% to $116.65, while the iShares iBoxx Investment Grade Corporate Bond ETF closed up 0.15% at $137.26.

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