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Weekly Fixed Income Views from January 15, 2021 Thumbnail

Weekly Fixed Income Views from January 15, 2021

Rates Market

  • Treasuries remain steady, despite the mixed U.S. economic data and evolving headlines out of D.C.
  • The week began with Treasury yields rallying to the highs since March (1.14%), but ended the week lower ~1.3bps back to approximately 1.10%.
  • The curve flattened into Friday, with the spread between 2s and 10s 96bps and 138bps between the 5- and 30-year.
  • On the auction front, the $24 billion 30-year was received well in the long end, yielding 1.825%.

Source: Bloomberg.

Corporate Market

  • The corporate spread for the USD Investment Grade All Sector OAS was tighter by 2-3 bps.
  • The  Investment Grade index saw a high of 96 and low of 92, the average range for the week was approximately 95. 
  • Issuance for the week missed street’s projection, new debt being priced in the market has a shorter tenor. Tranches issued 30 years+ are approximately 6% YTD down vs 12% last year.
  • Year-to-date there has been $74.5 billion in issuance vs $73.4 billion projected.
  • This week $24.2 billion was issued vs $30 billion projected.

Source: Bloomberg.

Corporate New Issue Highlights

Public Storage priced a $500 million 5Y +43

  • $500m WNG 5Y Fixed (Feb. 15, 2026) at +43

Royal Bank of Canada priced $3.25 billion in 4-parts

  • $1b 3Y Fixed (Jan. 19, 2024) at +22
  • $700m 3Y FRN (Jan. 19, 2024) at SOFR Equiv+30
  • $1.25b 5Y Fixed (Jan. 20, 2026) at +42
  • $300m 5Y FRN (Jan. 20, 2026) at SOFR Equiv+52.5

American Honda Finance priced $1.75 billion in 3-parts

  • $900m 3.5Y Fixed (July 12, 2024) at +35
  • $300m 3Y FRN (Jan. 12, 2024) at LiborEquiv+28
  • $550m 10Y Fixed (Jan. 13, 2031) at +70

Muni Market

  • Municipals underperformed Treasuries on the week with benchmark yields 3-5 bps higher across the curve, moving ratios slightly higher off record-lows.
  • Municipal funds saw their 10th straight week of inflows adding $2.6 billion for the week ending 1/13, more than double the week prior.
  • President-elect Biden released the administration’s plan for $1.9 trillion in economic relief which includes $350 billion for state and local governments as well as $20 billion for transit systems. The relief package is likely a starting point for negotiations as the size, composition and speed will be challenged.
  • Supply remains on the lighter side with 1/3 comprised of taxable issues. $6.5 billion is expected to price next week. Notable deals include; NJ Turnpike $1.46 billion, Houston Community College System $382.1 million, Dallas Independent School District $274.3 million.

Source: Bloomberg.