Weekly Fixed Income Views from February 19, 2021
- Amidst the sell-off, rates climbed to the highest levels in almost a year as the 10-year reached 1.33%.
- The spread between the 5-year and 30-year bond steepened to 155bps, last seen in 2015.
- The move out the curve comes in response to the ongoing fears of reflationary pressures and stimulus decisions.
- Short-term funding levels continue the descent as excess cash floods the market, adding pressure to the front end.
- The Treasury sold $30 billion of four-week bills Friday, with 1 month bills yielding 0.027% and 6 month bills at 0.045% during Friday’s open.
- The corporate spread week-to-date for the USD Investment Grade All Sector OAS was tighter by 3 bps.
- The Bloomberg Barclays US Aggregate corporate Avg. OAS is the tightest since 2018.
- The investment grade funds recorded $4.53 billion in inflows.
- High Yield funds reported $1.3 billion in outflows.
- Year-to-date primary issuance: $202.96 billion (-1% YoY).
- Month-to-date primary issuance: $75.4 billion.
- Week-to-date primary issuance: $14 billion vs projected $20 billion.
Corporate New Issue Highlights
- Mizuho priced $2 billion in 2-parts
- $1.4b 6.25NC5.25 Variable (May 22, 2027) at +67
- $600m 11.25NC10.25 Variable (May 22, 2032) at +87
- Expedia priced $1 billion 10Y +175
- $1b 10Y Fixed (March 15, 2031) at +175
- Municipals played catchup with Treasuries this week in the face of a steepening yield curve. Benchmark yields rose 2-15bps on the week, the most meaningful move since April, moving ratios higher.
- Seasonality factors and increased supply could further steepen yields.
- Municipal funds saw their 15th consecutive week of inflows adding $2 billion for the week ended 2/17.
- Clarity surrounding the next round of stimulus should surface in the next 2 weeks as Washington votes on the $1.9 trillion package with $350 billion proposed for state and local governments.
- Issuance next week is expected to be $8.82 billion. Notable deals include; University of CA $3.03 billion, San Diego Regional Transportation $537.5 million, NYC Municipal Water $523 million, Maryland St $475 million.