U.S. Investment-Grade Bond Supply Seen Subdued Ahead of July 4

(Bloomberg) -- New U.S. investment-grade bond supply is expected to slow to $10 billion to $15 billion next week ahead of the Independence Day holiday.

The market nears the second half of the year with spreads over Treasuries at their tightest levels in more than a decade, and investors will be watching for whether there’s any room to go tighter from here.

JPMorgan Chase & Co. strategists don’t think so.

“We see little value in spreads here, and nothing to push them wider either,” strategists led by Eric Beinstein wrote Friday. The bank’s year end high-grade spread forecast is unchanged from current levels, at 110 basis points.

After months of strong retail flows to high-grade bonds, momentum may finally be slowing.

Flows into U.S. corporate investment-grade bond funds fell to $233.4 million for the week ended June 23, the smallest addition since the positive streak started in November, according to Refinitiv Lipper. It compares to an intake of almost $4 billion the prior week. U.S. corporate high-yield funds also posted a modest inflow, with $188.9 million, the data show.

Korean chemical manufacturer LG Chem Ltd. held investor calls Friday for an investment-grade senior unsecured green bond sale, making it a candidate to sell debt next week.

High Yield

While the high-yield pipeline is quiet heading into the week, the backdrop remains highly attractive for junk-rated borrowers.

Centene Corp. on Thursday sold $1.8 billion of junk bonds with a record-low coupon for the high-yield market. The bond will yield 2.45%, an all-time low for a bond maturing in seven years or longer.

High-yield spreads have tightened to levels not seen since June 2007 amid a relentless rally in speculative-grade debt.

SAVE THE DATE: DoubleLine Capital’s head of investment-grade corporates Monica Erickson takes your questions at 10:00 a.m. New York time on June 29 in a live Q&A moderated by Bloomberg reporter Jack Pitcher.

At least one bank meeting for a leveraged loan sale is set for next week. Two U.S. bus divisions owned by FirstGroup Plc are raising about $2 billion in the leveraged loan market to back private equity firm EQT AB’s acquisition of the units. A lender call for the dual-part offering is scheduled for Monday.

In distressed credit, GTT Communications Inc.’s latest forbearance deadline was extended again to June 28 to allow further time for negotiations with creditors. The company also has a coupon payment on its 7.875% senior unsecured notes due on Wednesday June 30.

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