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Weekly Fixed Income Views from December 11, 2020 Thumbnail

Weekly Fixed Income Views from December 11, 2020

Insights

RATES MARKET

  • 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

Source: Bloomberg.

CORPORATE MARKET

  • 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

MUNI MARKET

  • 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

Source: Bloomberg.