Rates Market

• 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.

Source: Bloomberg.

Corporate Market

• 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

Source: Bloomberg.

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

Muni Market

• 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. 

Source: Bloomberg.