Weekly Fixed Income Views from February 12, 2021
- Treasuries were slightly weaker across the curve as risk assets continued to march higher.
- The curve steepened further Friday as the yield on the two-year remained locked around 10 basis points and 10-year notes moved back to the high end of the range at 1.19%.
- Earlier in the week, government bonds found some solid ground as inflation data came in lower than expected. The current 10-year note traded as low as 1.11% on Feb 11th.
- Supply was also a factor this week as weak auctions drove prices lower in the long end of the curve. The new 30-year bond “tailed” by 1 basis point and saw weak demand by indirect bidders (generally foreign investors).
- The treasury will sell 27 billion in 20-year bonds next Wednesday, and 9billion in 30-year Tips. This has become important to markets, as larger stimulus plans may be expected from the government.
- The corporate spread week-to-date for the USD Investment Grade All Sector OAS was tighter by 2 bps.
- The Investment Grade index crossed over through 90, currently at 88.4.
- Investment-grade funds recorded $2.7 billion in inflows.
- High Yield funds reported $228 million in outflows.
- It was a quiet week in primary issuance as the U.S. observes the holiday long-weekend
- Week-to-date issuance of $15 billion vs $25-30 billion projected.
- Year-to-date issuance of $188.6 billion (+14% year-over-year).
- Month-to-date issuance of $61.1 billion.
Corporate New Issue Highlights
Electronic Arts priced $1.5 billion in 2-parts
- $750m 10Y Fixed (Feb. 15, 2031) at +72
- $750m 30Y Fixed (Feb. 15, 2051) at +102
Carnival Corp priced $3.5 billion 6NCL
- Yield 5.75%
- 144a issue
JPMorgan priced $billion 4NC3 Social Bond +37.5
- Fixed to Float
- SOFR +37.5
- Municipals outperformed Treasuries on the week, with yields 2-6bps lower moving ratios to record lows.
- 5yr ratio ~ 41%
- 10yr ratio ~58%
- 30yr ratio ~73%
- Inflows into municipal funds continued for the 14th consecutive week, adding $2.6 billion.
- Supply/demand dynamics remain a tailwind as redemptions outpace supply as well as roughly 30% of taxable new issuance.
- State and local governments are expected to issue $5.2 billion next week. Notable deals include; Regional Trans Sales Tax $818.1 million, City of Tucson AZ $658.1 million, Nashville & Davidson County TN $551.1 million.