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Weekly Fixed Income Views from August 7, 2020 Thumbnail

Weekly Fixed Income Views from August 7, 2020

Rates Market

  • Treasury yields ended richer by up to 2bps at the long-end, despite the front-end remaining flat during the week.
  • The curve on the 2 Year and 10 Year Treasury notes touched April lows, with the 10 Year yield down 1.3bps to ~0.535% on Thursday.
  • Headlines and the looming stimulus package continue to drive rates.

Source: Bloomberg.

Corporate Market

  • The iShares iBoxx Investment Grade Corporate Bond ETF, LQD, was approximately - 6bps tighter week-over-week.
  • Spreads on corporate bonds are at or near March 2020 levels (please see chart below).
  • S&P affirmed Boeing’s long-term rating, but their revised the outlook to negative, down from stable. Bonds initially widened out, but ended  5-10 tighter.
  • Primary issuance was expected to be $30-35 billion for the week 
  • At the beginning of the week, Alphabet Inc. launched a mega 6-part deal for $10 billion. New corporate supply is in high demand, with the average oversubscription rate over 4x. 
  • Mid-week, Activision Blizzard, Inc. launched a 2-part deal (10 Year & 30 Year) which was oversubscribed by nearly 10x leading the dealer to upsize the deal to $ 2billion.

Source: Bloomberg.

Corporate New Issue Highlights

Alphabet Inc. issued a 6-part deal, 4x oversubscribed

  • $1 billion 5Y Fixed (Aug. 15, 2025) at +25
  • $1 billion 7Y Fixed (Aug. 15, 2027) at +45
  • $2.25 billion 10Y Fixed (Aug. 15, 2030) at +58
  • $1.25 billion 20Y Fixed (Aug. 15, 2040) at +73
  • $2.5 billion 30Y Fixed (Aug. 15, 2050) at +88
  • $2 billion 40Y Fixed (Aug. 15, 2060) at +108

Activision issued a 2-part deal, 10x oversubscribed 

  • $500 million 10Y Fixed (Sept. 15 2030) at +85
  • –        $1.5 billion 30Y Fixed (Sept. 15, 2050) at +130

Linde plc (Praxair) issued a 2-part deal, tagged “will not grow”, which was 6x oversubscribed 

  • $700 million 10Y Fixed (Aug. 10, 2030) at +57
  • $300 million 30Y Fixed (Aug. 10, 2050) at +80

Muni Market                          

  • Another week, another inflow.  Municipal funds saw their 13th week of inflows, $1.6b, for the week ended August 5th.
  • 30-day visible supply sits at $18.6 billion vs. $35.2 billion in redemptions.
  • With the Fed expanding the eligibility of the Municipal Liquidity Facility last month,  the MTA (Metropolitan Transportation Authority, the largest public transit authority in the U.S., responsible for public transportation in New York) is considering utilizing the facility for approximately $450 million, depending on pricing. 
  • With a self-imposed Friday deadline looming, lawmakers continue to negotiate additional stimulus. GOP leaders have conceded a little more towards the middle ground proposing $200 billion in additional aid to states and local governments, while Democrats are looking for $1 Trillion. After a contentious meeting on Thursday, talks are in danger of collapse while Friday’s positive economic number may cause a further divide.

Source: Bloomberg