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Weekly Fixed Income Views from February 19, 2021 Thumbnail

Weekly Fixed Income Views from February 19, 2021

Rates Market

  • 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.


Source: Bloomberg.

Corporate Market

  • 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.

Source: Bloomberg.

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

Muni Market

  • 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.


Source: Bloomberg.