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Weekly Fixed Income Views from January 22, 2021 Thumbnail

Weekly Fixed Income Views from January 22, 2021

Rates Market

  • Yields on the ten-year have remained range-bound this week, currently muted around ~1.09%.
  • The curve was slightly steeper on the week, with 2s10s at 97.1bps versus last Friday at 94.6bps.
  • The spread between the 5-year and 30-year bond reached highs of 142.1bps.
  • Overall, the outlook for the Treasury market remains focused on longer term supply and the rate of inflation pick up.

Source: Bloomberg.

Corporate Market

  • The corporate spread for the USD Investment Grade All Sector OAS was wider by 2 bps.
  • Investment Grade Bond Funds reported by Lipper saw inflows of $8.25 billion, the fourth largest ever
  • High-Yield Bond Funds saw outflows of $905 million vs $1.26 billion last week
  • As the hunt for yield continues, CCC rated bonds are yielding all time lows (see chart below) 
  • The bulk of new debt being issued came from the financial sector 
  • Year-to-date, $100.3 billion has been issued (-8% YoY)
  • There was $25.9 billion in new issues this week, compared with $25 billion projected

Source: Bloomberg.

Corporate New Issue Highlights

  • Bank of New York Mellon issued $1.2bln in 2-parts:
  • $700m 5Y Fixed (Jan. 28, 2026) at +35
  • $500m 10Y Fixed (Jan. 28, 2031) at +55
  • Citigroup issued $2.5bln 6NC5 Fixed to Floater at +68
  • Goldman Sachs issued $5.5bln in 3-parts:
  • $2.25b 2NC1 Fixed at +35
  • $750m 2NC1 FRN at SOFR+41
  • $2.5b 11NC10 Fxd-to-FRN at +90

Muni Market

  • Municipals slightly outperformed Treasuries on the week with benchmark yields 1-3bps lower leaving ratios little changed.
  • The municipal market continues to be supported by supply/demand dynamics, continued inflows, as well as anticipation of additional stimulus and changes in tax policy.
  • Inflows into municipal funds continued for the 11th straight week adding $2.38b for the week ended 1/20.
  • 30-day supply sits at $10.5 billion vs. $17.8 billion in redemptions.
  • Next week $6.1billion is expected to price. Notable deals include; $1 billion Texas Gas, Los Angeles Dept. of Airports $758.9 million and Chicago Board of Ed $560.3 million.

Source: Bloomberg.