- The dramatic selloff continued this week as yields out the front end of the U.S. Treasury curve continued to climb.
- On Friday the 10-year note hovered around 1.56%, with the week’s range topping yearly highs of 1.61%. Repo for the 10-year remained special dropping below -3%.
- Thursdays remarks by Fed Chairman Powell reinforced the Fed’s current dovish outlook, signaling no changes to the current monetary policy despite the expectations for rising inflation and economic recovery.
- The curve widened 12bps between the 2 and 10-year notes, while the spread between the 5 and 30-year bond came down as the long end fell 3 bps.
- On the data front, February’s payroll number came in much better than expected with 379k jobs added. An uptick was seen in the leisure and hospitality sector which remains embattled from the pandemic. The headline unemployment rate dropped from 6.3% to 6.2%.
- The corporate spread week-to-date for the USD Investment Grade All Sector OAS was wider by +1bps.
- Investment grade funds recorded $5.2 billion in inflows.
- High Yield funds reported $601.4 million in inflows.
- It was a busy week for primary issuance as 30+ deals came to market and exceeded the street’s projected amount.
- Year-to-date $306.25 billion (+26% YoY)
- Month-to-date $65.4 billion
- Week-to-date $65.4 billion vs projected $50 billion
Corporate New Issue Highlights
- Marriott Intl priced a $1.1bln 10Y
- $1.1b 10Y Fixed (April 15, 2031) at +140
- Barclays priced $2bln in two parts
- $1b 11NC10 Fixed (March 10, 2032) at +120
- $1b 21NC20 Fixed (March 10, 2042) at +170
- Mastercard priced $1.3bln in two parts
- $600m 10Y Fixed (March 15, 2031) at +50
- $700m 30Y Fixed (March 15, 2051) at +78
- John Deere Capital priced $1.9bln in 3 parts
- $600m Short 2Y Fixed (Jan. 17, 2023) at +15
- $800m Short 3Y Fixed (Jan. 17, 2024) at +22
- $500m 7Y Fixed (Jan. 17, 2028) at +45
- Coca-Cola priced $2.5bln in 3 parts
- $750m 7Y Fixed (March 5, 2028) at +45
- $750m 10Y Fixed (March 5, 2031) at +60
- $1b 30Y Fixed (March 5, 2051) at +85
- Estee Lauder priced a $600mln 10Y
- $600m 10Y Fixed (March 15, 2031) at +57
- Municipals detached from Treasuries with yields 2-6 bps lower on the week, steepening the curve as demand was stronger inside of 7yrs.
- With the sharp move in the Treasury curve, municipals richened on a relative value basis with ratios lower on the week. Ratios remain on the lower end of long term averages.
- Municipal funds saw their first outflow in 4 months with $605 million exiting as investors weigh the continued rise in interest rates and some tax bill selling being contributing factors.
- State and local governments are expected to issue $8.11billion next week. Notable deals include; State of California $1.9 billion, NYC Water $573.2 million, Virginia Public Building Authority $551.1 million and the Massachusetts Port Authority $417 million.