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

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.