- The new year started off with the yield on the 10-year breaching 1.00% on Tuesday for the first time since March 2020 and continued to climb through the week.
- On this move, the US Treasury curve hit the steepest level since 2016, touching 139.4 on Thursday.
- After Friday’s release of a weaker than expected payroll numbers, the yield initially spiked 2bps above 1.10% and is hovering around this range.
- While the labor market lost jobs for the first time in months, the results out of Georgia, and the Democratic control of the Senate point to larger fiscal stimulus support.
- The corporate spread for the USD Investment Grade All Sector OAS was flat to -1 bps tighter this week.
- The Investment Grade Index failed to breach 100, as markets rallied.
- Primary issuance of $49 billion for the week surpassed the street’s projections of $40 billion
- New issue debt was priced with negative new issue concessions
- Average order-books were at healthy subscription rates (2.75-3s)
- “Walk in” form initial price talk was approximately 25bps
Corporate New Issue Highlights
Toyota Motor Credit priced a $3 billion deal in 4 parts
- $1b 3Y Fixed (Jan. 11, 2024) at +25
- $750m 3Y FRN (Jan. 11, 2024) at SOFR+33
- $700m 5Y Fixed (Jan. 9, 2026) at +40
- $550m 10Y Fixed (Jan. 10, 2031) at +62.5
GM Financial priced a $2.5 billion deal in 2 parts
- $1.5b 5Y Fixed (Jan. 8, 2026) at +92
- $1b 10Y Fixed (Jan. 8, 2031) at +140
Kroger priced $500mln 10yr at +77
Broadcom priced a $10 billion deal in 5 parts
- $750m 7Y Fixed (Feb. 15, 2028) at +135
- $2.75b 10Y Fixed (Feb. 15, 2031) at +155
- $1.75b 12Y Fixed (Feb. 15, 2033) at +170
- $3b 20Y Fixed (Feb. 15, 2041) at +185
- $1.75b 30Y Fixed (Feb. 15, 2051) at +210
Home Depot priced a $3 billion deal in 3 parts
- $500m 7Y Fixed (March 15, 2028) at +35
- $1.25b 10Y Fixed (March 15, 2031) at +52
- $1.25b 30Y Fixed (March 15, 2051) at +77
- Municipal yields were 1-4 bps higher, but outperformed Treasuries on the week as a result of a steepening yield curve on the back of a Democratic sweep in the GA Senate runoffs.
- Municipal/Treasury ratios are at or near record lows.
- 5 year: ~ 44%
- 10 year: ~ 65%
- 30 year: ~ 78%
- Supply/Demand dynamics and continued fund inflows ($1.1billion for the week ending 1/6) still remain supportive. Taxable issuance continues to be approximately 1/3 of new supply.
- Additional stimulus, aid to state & local governments, tax policy and fiscal spending come into focus with a Democrat run government; although far reaching proposals will likely fizzle with a slim majority and moderate viewpoints.
- The new issue calendar remains light with state and local governments expected to price $3.56 billion next week.