Weekly Fixed Income Views from September 11, 2020
- Treasury prices were down across the curve to start the week, as yields climbed across the curve.
- The spread on the 5-year and 30-year bonds steepened to 118bps, and the 10-year was higher by 1.3bps around 0.70% on Wednesday.
- The reopened auctions for the 10-year and 30-year bonds were met with weak demand.
- Closing into Friday, the Treasury market is finishing with gains across the curve as yields came down on stronger than expected August CPI.
- 10 year yields ended the week around 0.675%.
- The corporate spread for the iShares iBoxx Investment Grade Corporate Bond ETF, LQD, was approximately +5bps wider this week.
- Primary Issuance – The market saw a few dozen companies in the primary market as supply reached $65 billion on Thursday vs the estimate of $40-50 billion for the week.
- The year-to-date run rate is 67% ($1.44 trillion)
- Given the equity volatility and risk-off stance, new issues were at a healthy interest or oversubscription levels of approximately 4x and flat-to-negative new issue concessions (NIC).
- The bond tenors being issued are shorter compared to previous deals this year, which should help supply in the front end.
Corporate New Issue Highlights
- Nissan $8 billion 4-part Deal (144a/RegS)
- $1.5b 3Y Fixed (Sept. 15, 2023) at +287.5
- $1.5b 5Y Fixed (Sept. 17, 2025) at +325
- $2.5b 7Y Fixed (Sept. 17, 2027) at +387.5
- $2.5b 10Y Fixed (Sept. 17, 2030) at +412.5
- Shell $2.5 billion 3-part deal
- $1b 3Y Fixed (Sept. 15, 2023) at +30
- $750m Tap of RDSALN 2.75% 04/06/30 at +95
- $750m Tap of RDSALN 3.25% 04/06/50 at +145
- TD Bank $2.25 billion 2-part deal
- $1.25b 3Y Fixed (Sept. 11, 2023) at +33
- $1b 5Y Fixed (Sept. 11, 2025) at +53
- MetLife $1billion PerpNC5 Preferred at 3.85%
- Nestle Holdings $4 billion 4 part deal (144a issue)
- $1.15b Long 3Y Fixed (Jan. 15, 2024) at +28
- $750m Long 5Y Fixed (Jan. 15, 2026) at +45
- $1.1b 7Y Fixed (Sept. 15, 2027) at +55
- $1b 10Y Fixed (Sept. 15, 2030) at +65
- Unilever Capital Corp $1 billion 2-part deal
- $500m 3Y Fixed (Sept. 14, 2023) at +25
- $500m 10Y Fixed (Sept. 14, 2030) at +70
- Through the first 2 weeks of September, municipal yields remain largely unchanged with a slight steepening of 2bps across the curve.
- Negative seasonality will continue with increased issuance and decreased redemptions.
- Due to the tax law changes of 2017 requiring refunding’s to be issued via a taxable vehicle, an uptick in taxable issuance as a percent of total issuance has helped tax exempt yields remain steady month-to-date.
- With a lack of stimulus and uncertainty moving into election season, focus will shift towards credit quality, sector selection and duration positioning.
- Municipal fund inflows continued for the 18th consecutive week adding $1 billion for the week ended 9/9, up from $139 million the prior week.
- Notable deals next week include: NYC Traditional Finance Authority $1.25 billion; Metropolitan Transportation Authority $900 million; City of Houston TX Airport System $835 million; Texas Water Development Board $599.6 million.