Weekly Fixed Income Views from March 12, 2021
- Treasuries remained under pressure this week as yields out the curve climbed sharply.
- The 20-year led the move with yields rising 12.5bps on the day, while the 30-year topped 2.384%.
- Thursday’s strong 10-year auction stopped at 1.523%, surpassing levels Friday moving 10bps to a YTD high of 1.637%
- The front-end of the curve and funding markets have remained anchored near zero with heavy Treasury supply in recent weeks.
- On the Fed front, the Federal Open Market Committee’s meeting next week will be a major focus.
- The corporate spread week-to-date for the USD Investment Grade All Sector OAS was wider by +10bps.
- Investment grade funds recorded $3.3 billion of inflows.
- High yield funds reported $5 billion of outflows vs $601 million of inflows the prior week.
- VZ priced a $25 billion 9 tranche bond deal, making the deal the 4th largest on record.
- For reference, in 2013 Verizon did a $49 billion bond deal for the acquisition of Vodafone. The VZ bond deal was very well received with the shortest tranche (3-year) having a 5.1x cover. At the peak of the order book, the 30-year and 10-year had the most demand.
- Year-to-date issuance: $358.6 billion (+40% YoY)
- Month-to-date issuance: $117.8 billion
- Week-to-date issuance: $52.4 billion vs projected $50 billion
Corporate New Issue Highlights
Verizon priced $25bln in 9 parts
- $1.75b 3Y Fixed (March 22, 2024) at +45
- $750m 3Y FRN (March 22, 2024) at SOFR+50
- $2.75b 5Y Fixed (March 20, 2026) at +70
- $750m 5Y FRN (March 20, 2026) at SOFR+79
- $3b 7Y Fixed (March 22, 2028) at +90
- $4.25b 10Y Fixed (March 21, 2031) at +107
- $3.75b 20Y Fixed (March 22, 2041) at +120
- $4.5b 30Y Fixed (March 22, 2051) at +130
- $3.5b 40Y Fixed (March 22, 2061) at +145
American Airlines priced $6.5bln in 2 parts
- $3.5b 5NCL Fixed (April 20, 2026) at Par to Yield 5.5%
- $3b 8NCL Fixed (April 20, 2029) at Par to Yield 5.75%
JPMorgan priced $3bln in 2 parts
- $2b 3NC2 Fxd-to-FRN (March 16, 2024) at +53
- $1b 3NC2 FRN (March 16, 2024) at SOFR+58
- Municipals continued to diverge from Treasuries for most of the week reversing course on Friday as the 10-yearr Treasury traded through 1.60. Yields were 2-9bps lower on the week, tightening ratios.
- The latest $1.9 Trillion stimulus plan was passed and signed on Thursday making $360 billion available to state and local governments. The plan should quell credit concerns as most states entered the pandemic with healthy reserves combined with better revenue collections than originally projected. Transit systems and higher education will also benefit from the deal.
- 30-day visible supply stands at $13.73 billion, the highest of the year. Taxables make up roughly 20%.
- Next week, state and local governments are expected to sell $7.94 billion. Notable deals include; State of NY $1.27 billion, State of Illinois $1.25 billion, State of Oregon $627.1 million.