Investment-grade primary market prepares to tie bow on year; strong January supply eyed

By Cristal Cody

Tupelo, Miss., Dec. 16 – Only one bond issuer came to the investment-grade primary market over the week, which was dominated by inflation data and the Federal Reserve’s rate hike.

Nothing much else is expected for the rest of the month and year, sources report.

JPMorgan Chase & Co. on Monday brought a surprise $3 billion offering of 5.546% three-year notes (A1/A-) that priced 15 basis points tighter than guidance at a spread of Treasuries plus 115 bps and later firmed 2 bps in the secondary market, sources said.

December is shaping up to end with less than $8 billion of high-grade issuance, short of market forecasts of about $25 billion of volume.

But, supply in January is anticipated to make up for the dwindling appetite in December, sources said.

As much as $150 billion of investment-grade bonds may hit the primary in the first month of the year, according to market sources.

At the least, sources are expecting about $125 billion of new issuance in January, already a typically busy month.

“We look for a relatively busy $130 - $140 bn of issuance in January, in contrast to the very low $8 bn priced so far in December,” BofA Securities Inc. securities analysts said in a note on Thursday.

Inflows return

Meanwhile, inflows moderated over the past week ended Wednesday.

High-grade corporate investment fund inflows declined to $177 million from $1.2 billion of inflows in the previous week after posting heavy outflows of $6.92 billion in the week prior, according to Refinitiv Lipper US Fund Flows.

Corporate investment-grade funds were headed toward the year’s end with about $125 billion of annual outflows.

U.S. high-grade funds and ETF flows saw a $1.14 billion inflow this past week ended Wednesday, similar to the $1.21 billion outflow in the prior week, according to a BofA research note.

© 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.