Rates Market

• Treasury prices were down on the week as yield climbed slightly higher. 

• The yield on the 10-year is trading around 0.92%, staying in the upper bound of the 0.88%-0.95% weekly range.

• The spread between 2s10s is back around 80.1 bps, approaching the month’s high of 81.4 bps on 12/4.

• The Fed’s statement from Wednesday’s FOMC meeting highlighted that asset purchases will continue until “substantial” progress is made. Overall the Fed remains cautious on the near term outlook, holding the target benchmark unchanged at 0.25% to keep interest rates low.

• Heading into the holiday week, focus remains centered on vaccine headways and stimulus progress out of Washington.

 

Source: Bloomberg.

Corporate Market

• The corporate spread for the iShares iBoxx Investment Grade Corporate Bond ETF, LQD, was approximately -7 bps tighter this week.

• Investment grade spreads tightened slightly, aligning with equity futures as congressional leaders haggled over the final details of a $900 billion stimulus package.

• Month-to-date corporate bonds have once more outperformed government sectors.
• The US credit index is down 9 bps in December compared to government bonds at -0.42% month-to-date.

• The new issue corporate market was essentially silent this week as company borrowings may be completed for 2020.
• Year-to-date issuance run rate 59% ($1.74 trillion)
• Mont-to-date issuance: $38 billion vs $25-30 billion projected 
• Week to date issuance: $1.7 billion vs $5 billion projected

Source: Bloomberg.

Corporate New Issue Highlights

Berry Global Issued a 5-year

• $750m 5Y Snr Sec Fixed (Jan. 15, 2026) at +120

Microchip Issued a 3-year

• $1.4b 3Y Snr Sec Fixed (Feb. 15, 2024) at +80

Muni Market

• Municipal bonds slightly outperformed Treasuries on the week as benchmark yields fell 1bps.

• It was a quiet primary issuance week, although municipal bond trading picked up this week. Institutional investors offered $3.7 billion to the secondary market from "bid wanted" lists.  That was up over 20% from last week.

• Municipal fund inflows continued with $915mm for the week ending 12/16.

• Light supply expected for the remainder of the year. US state and local governments are expected to sell $252 million of bonds next week. Notable deals include; San Jose school district $150 million. 

Source: Bloomberg.