- Treasuries remained fairly muted on the week, with yields trading slightly flatter than recent ranges.
- Yields were lower across the curve by 0.4bps to 3.5bps.
- The 10-year note hit a 52-week low at 0.581% on Thursday.
- No major headlines are expected on the Fed front, as speakers are in the black out period ahead of the July 29 FOMC decision.Source:Bloomberg.
- Average corporate spreads have tightened in week-over-week; the iShares iBoxx Investment Grade Corporate Bond ETF, LQD, 1-week range came in 6bps.
- New corporate issuance was low this week – corporate new issues were approximately $6 billion vs analyst forecasts of $15-$20 billion.
- Early indications of August supply estimate approximately $50 billion which is the lowest August estimate since 2014, during the Greek debt crisis.
- Be wary of make-whole call provisions on bonds. There are a few with low primary issuance especially in the front end of the curve. Corporate spreads have tightened to levels where the make-whole call provisions are becoming a problem.
Corporate New Issue Highlights
- Bank of America
- $4.75 billion in two part offering
- $2.75 billion 11NC10 Fixed-to-FRN (July 23, 2031) at +128
- Guidance: +130a (+/-2), Initial price talk: +145 area
- 1-month par call, MWC
- $2billion Tap of BAC 2.676 06/19/41 Corp at +135
- Guidance: +135#, Initial price talk: +145 area
- Coupon: 2.676000
- 1-month par call, MWC
- Toyota Motor
- $750 million 2-Yr Fixed (July 22, 2022) at +33
- Guidance +35a (+/-2), Initial price talk: low +50s
- Exp. Ratings: A1/A+/A+
- Format: SEC registered, senior unsecured, Medium-Term Notes, Series B; Diversity & Inclusion Offering
- UOP: GCP, including the purchase of earning assets and the retirement of debt
- Settlement: July 23, 2020 (T+3)
- Denoms: 2k x 1k
- Tax-exempt municipals moved with Treasuries again this week as yields fell slightly lower, led by longer maturities.
- With the Fed anchoring short-term rates for the foreseeable future investors are forced to move out on the curve for yield pickup.
- The municipal market continues to find support from supply/demand dynamics with $11.6 billion in expected supply over the next month vs $32.9 billion in maturities.
- As states and municipalities look to plug larger than expected budget gaps as a result of the pandemic, eyes continue to fall on Washington to pass another round of much anticipated relief.
- With the delayed tax season behind us, the SIFMA 7-day index reset to 0.18% down from 0.21% the week prior.