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Weekly Fixed Income Views from November 13, 2020 Thumbnail

Weekly Fixed Income Views from November 13, 2020

Rates Market

  • The start of the week saw US Treasury prices down as yields climbed, and stocks remained volatile on election and vaccine news.
  • The yield on the 10-year is currently around 0.885%, the middle of the weekly range, which saw a high of 0.975% on Monday.
  • Curve spreads are closing little changed on the week, with 2s10s at 71bps and 5s30s at 124bps.
  • The 30-year yield was near 1.642% into Friday’s close versus 1.652% Thursday.

Source: Bloomberg.

Corporate Market

  • The corporate spread for the iShares iBoxx Investment Grade Corporate Bond ETF, LQD, was approximately +2 bps wider this week.
  • Spreads were tighter at the beginning of the week but faded and widened out as COVID cases spiked and new restrictions were imposed.
  • Investment grade issuance was light last week, however there was a flurry of new deals in the last three trading sessions of this week. 
    • The market saw 17 companies issue new debt and surpassing the projected amount of $30 billion.
    • The biggest deal was brought on Tuesday, VZ issued $12 billion 5-part deal.
  • Year-to-date run rate is 59% ($1.66 trillion)
  • Week-to-date $41.3 billion vs $30 billion expected

Source: Bloomberg.

Corporate New Issue Highlights

JPMorgan $5.75 billion 3-Part Deal

  • $2.75b 6NC5 Fxd-to-FRN (Nov. 19, 2026) at +65
  • $1.4b 11NC10 Fxd-to-FRN (Nov. 19, 2031) at +90
  • $1.6b 21NC20 Fxd-to-FRN (Nov. 19, 2041) at +87.5

Verizon $12 billion 5-Part Deal

  • $2b 5Y Fixed (Nov. 20, 2025) at +40
  • $2.25b Long 10Y Fixed (Jan. 20, 2031) at +85
  • $3b 20Y Fixed (Nov. 20, 2040) at +115
  • $2.75b 30Y Fixed (Nov. 20, 2050) at +115
  • $2b 40Y Fixed (Nov. 20, 2060) at +130

Bristol-Myers Squibb $7 billion 6-Part Deal

  • $1.5b 3NC1 Fixed (Nov. 13, 2023) at +30
  • $1b 5Y Fixed (Nov. 13, 2025) at +35
  • $1b 7Y Fixed (Nov. 13, 2027) at +45
  • $1.25b 10Y Fixed (Nov. 13, 2030) at +55
  • $750m 20Y Fixed (Nov. 13, 2040) at +65
  • $1.5b 30Y Fixed (Nov. 13, 2050) at +85

Muni Market

  • Municipals were slightly lower on the week (+1-2bps) outperforming Treasuries (+4-7bps).
  • With the White House stepping back from further stimulus discussions, wider divisions between McConnell and Pelosi likely lower the odds additional stimulus will be passed before next year.
  • The 2 Georgia Senate runoff races on Jan. 5 will play an important role for the future of fiscal policy. Currently, Republicans hold a 50-48 lead in the Senate. History favors Republicans in turnout for runoff races. In the event Democrats win both races, the Vice President serves as tie-breaker.
  • Municipal bond funds reversed prior week outflows adding $1.2 billion for the week ending 11/11.
  • With muted supply expected into year end, current supply/demand dynamics are supportive. 30-day visible supply of $15.9 billion vs $22.4 billion in redemptions. 
  • Issuance next week is expected to be $9.83 billion. Notable deals include; State of New Jersey $4bn, Commonwealth of Massachusetts $1.36bn, Port of Oakland $531.1mm, City of Baltimore MD Water Utility Fund $415.9mm.


Source: Bloomberg.