Weekly Fixed Income Views from December 11, 2020
- Treasuries are richer finishing the week as pressure is out the curve as yields rallied ~2bp across the middle of the curve.
- The yield on the 10-year dropped to the lower bound range on the week, opening at 0.972% to start and touching 0.871% on Friday.
- 2-year yields also dropped 1.8 basis points Friday to 0.119%, the lowest since early October.
- On the supply front, Thursday’s 30-year auction was met with strong demand. The spread between 5 year and 30 year bonds flatted to 125.15bps
- The corporate spread for the iShares iBoxx Investment Grade Corporate Bond ETF, LQD, was wider approx. +10bps
- As we approach year-end, supply will start to dwindle. New issue supply has surpassed month-to-date and looking ahead next week’s supply projected to be $5 billion.
- Year-to-date run rate 59% ($1.74 trillion).
- Month-to-date $36 billion surpassing the projected $25-30 billion.
- Week-to-date $20 billion surpassing the projected $15-20 billion.
CORPORATE NEW ISSUE HIGHLIGHTS
HSBC Holdings $1.5bln PerpNC10
- $1.5b PerpNC10 Sub Variable at Par to Yield 4.6%
Schwab $2bln Debt issued in 2-Parts
- $1.25b 5Y Fixed (March 11, 2026) at +53
- $750m 10Y Fixed (March 11, 2031) at +75
Schwab $2.5bln PerpNC10
- $2.5b PerpNC10 Variable at Par to Yield 4%
Nasdaq $1.9bln Debt issued in 3 Parts
- $600m 2NC1 Fixed (Dec. 21, 2022) at +30
- $650m Long 10Y Fixed (Jan. 15, 2031) at +75
- $650m 20Y Fixed (Dec. 21, 2040) at +80
- Municipals underperformed Treasuries on the week with yields approximately 1bps lower across the curve
- The municipal market continues to be supported by:
- Light supply and issuance heading into year-end; $8.53b over the next 30 days
- Seasonal redemptions; $20.4b over the next 30 days
- Continued fund inflows; $992mm for the week ended 12/9
- Stimulus discussions continue with the White House/Mnuchin re-entering negotiations. Business protections and aid to state and local governments remain divisive topics. An agreement reached before the holiday break would likely include or exclude both.
- New York City was downgraded to AA- from AA by Fitch and outlook changed to negative by S&P as a result of the economic strains brought on by the pandemic