- Yields on U.S. Treasuries continued to climb as the Federal Reserve remained the focus this week.
- The curve steepened further on Friday, with the spread between the 2-year note and 30-year bond reaching 232bps, wider by 4bps on the week.
- The 10-year yield rose as much as 4 basis points to 1.75% after news that the Fed will not extend the bank relief put in place at the onset of the pandemic, causing some deleveraging.
- Massive supply of cash continues to flood the market as primary dealer reported holdings were down $16 billion.
- Wednesday’s Fed minutes revealed a very dovish tone as it is unlikely that the Feb will raise interest rates within the next three years.
- The front of the bill curve remains near zero as repurchase agreements and money markets continue to enter negative territory. Yields out the curve past 5-years moved higher, in line with inflation expectations.
- The corporate spread week-to-date for the USD Investment Grade All Sector OAS was tighter by +1bps.
- Investment grade funds recorded $5.43 billion in inflows vs $3.3 billion in inflows the prior week.
- High yield funds reported $410 million in inflows vs $5 billion in outflows the prior week.
- New issuance week-to-date of $24 billion fell short of the street’s projected amount of $35 billion as the market digested the FOMC meeting and the rise in rates.
- The new issue deals still had a healthy interest book at 2-3x.
- Year-to-date issuance $383.9 billion (+35% year-over-year).
Corporate New Issue Highlights
- Marriott Intl priced a $1.1bln 10Y
- $1.1b 10Y Fixed (April 15, 2031) at +140
- Toyota priced $2.75 billion in 3 parts
- $1.25 billion 3Y Fixed at +35
- $1 billion 5Y Fixed at +48
- $500 million 10Y Fixed at +65
- Schwab priced $4 billion in 3 Parts
- $1.5 billion 3Y Fixed (March 18, 2024) at +43
- $1.25 billion 3Y FRN (March 18, 2024) at SOFR+50
- $1.25 billion 7Y Fixed (March 20, 2028) at +75
- Raymond James priced $750 million (deal was upsized from $500 million)
- $750 million 30Y Fixed at +130
- Municipal yields rose 6-12bps higher, underperforming Treasuries, as inflation concerns continue to drive rates higher after the Federal Reserve confirmed interest rate policy will remain accommodative through the recovery.
- Ratios were slightly higher on the week with some relative value inside 5 years, but remain on the richer side of longer term averages outside of 5 years.
- Municipal funds saw $1.27 billion of inflows for the week ending 3/17.
- Earlier in the week President Biden revealed his tax policy change proposals, increasing corporate tax rates from 21% to 28%, higher taxes on earners over $400k, and increasing capital gains and estate taxes among them.
- Visible supply hovers around $12 billion, above the 2021 average.