Weekly Fixed Income Views from September 18, 2020
- Yields remained mostly range bound, with 10s closing back around 0.674%.
- The curve steepened mid-week as 5s30s reached 117.6bps. Overall, the long-end moved slightly week over week, with yields up 2bps into Friday.
- The FOMC meeting out Wednesday brought little surprises, as the Fed remains dovish and focused on keeping interest rates low over the next three years. Additionally, the Fed plans to let the inflation target hover moderately above 2% to allow for more accommodative guidance.
- The corporate spread for the iShares iBoxx Investment Grade Corporate Bond ETF, LQD, was approximately -4bps tighter this week.
- Primary Issuance – Bond supply tampered down into Wednesday as the market awaited the FOMC decision. The Fed announced rates will be held near zero for long period of time. Post- Fed announcement the stock market fell and flattened the curve as bond investors reached for yield.
- Year-to-date run rate: 67% ($1.48 trillion).
- Week-to-date: $35 billion vs $40 billion expected.
Corporate New Issue Highlights
Verizon - $1 billion 10-year Green bond
- $1billion WNG 10Y Fixed (Sept. 18, 2030) at +83
Barclays - $1 billion 15NC10
- $1billion 15NC10 Fixed (Sept. 23, 2035) at +290
Coca-Cola - $4.1 billion 3 Parts
- $1.3 billion Long 7Y Fixed (March 15, 2028) at +55
- $1.3 billion Long 10Y Fixed (March 15, 2031) at +70
- $1.5 billion Long 30Y Fixed (March 15, 2051) at +110
Uber Technologies - $500m 7.3NC3(144A/RegS) at Par to Yield 6.25%
- $500m 7.3NC3 Fixed (Jan. 15, 2028) at Par to Yield 6.25%
- Municipal yields were unchanged for the week and slightly steeper by 1-3bps month to date.
- Increase in taxable vs tax exempt issuance as a result of refundings has given additional support to tax exempt yields.
- On Thursday, New Jersey lawmakers passed a bill to increase the tax rate from 8.97% to 10.75% on incomes over $1mm to pay for rebates to middle class households. This could result in additional demand for NJ bonds as wealthy households seek tax free income.
- Washington stimulus talks continue without much progress. Trump supports increasing the amount of the GOP package to $1.5 Trillion from $650 billion. House Democrats are looking for $2.2 Trillion.
- Municipal bond funds saw their 19th straight week of inflows adding $612 million for the week ending 9/16.
- 30 day visible supply is $16 billion vs $25.9 billion in redemptions.
- Notable deals next week include: Chicago, IL $1.24 billion; New York City IDA $923.5 million; Texas Water Development Board $599.6 million.