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Weekly Fixed Income Views from October 2, 2020 Thumbnail

Weekly Fixed Income Views from October 2, 2020

Rates Market

  • US Treasuries remained range bound throughout the week, closing the month with slight gains.
  • Overall, the yield on the 10-year Treasury only moved ~13bps throughout trading sessions in September.
  • Curves are closing marginally steeper to start the month, with 2s/10s at 55.9bps and  5s/30s at 120.1bps. The 10-year yield is cheaper at 0.691%.
  • Headlines out Friday on the President and First Lady’s positive COVID results, as well as the weak jobs numbers did little to the impact the overall curve.

Source: Bloomberg.

Corporate Market

  • The corporate spread for the iShares iBoxx Investment Grade Corporate Bond ETF, LQD, was approximately -8bps tighter this week.
  • Primary Issuance – For the month of September, primary calendar for bond issuance was focused inside 10yrs vs long-end (June to August). Issuers continue to call high coupon maturities in the front end to refinance out longer at low rates.  
  • Year-to-date run rate is 67% ($1.55 trillion)
  • Week-to-date $14 billion vs $25 billion expected

Source: Bloomberg.

Corporate New Issue Highlights

  • Jefferies Group $500 million 12-Yr deal - $500m WNG 12Y Fixed (Oct. 15, 2032) at +217
  • Mondelez $1.25 billion 2 part deal
    • $625m 12Y Fixed (Oct. 15, 2032) at +122
    • $625m Tap of MDLZ 2.625% 09/04/50 at +135
  • Danaher $1 billion 30-Yr deal
    • $1b 30Y Fixed (Oct. 1, 2050) at +123

Muni Market

  • After little movement in yields for most of the month, the AAA benchmark muni curve pivoted around the 5 year steepening 4bps on the week and approximately 7bps month-to-date.
  • Amidst concerns over the ability of state and local governments to continue to weather the pandemic fallout without additional stimulus, municipal bond funds saw outflows of $775mm for the week ended 9/30.  This marks the first outflow since May after 20 consecutive weeks of inflows.
  • Moody’s downgraded NYC’s credit rating to Aa2 from Aa1 citing financial strains in response to the virus as well uncertainties surrounding the city’s economy in a prolonged pandemic. The city plans to issue $1.1 billion in GO’s next week to finance capital projects and lock in some outstanding floating rate debt.
  • Q3 issuance was the highest Q3 issuance since 2011, $135 billion with approximately 1/3 being taxable. 30-day visible supply sits at $17.7 billion and will likely grow further heading into the election.

Source: Bloomberg