Weekly Fixed Income Views from September 25, 2020
- Yields shed 0.5 bps to 2 bps across the curve on the week, with the 10-year down 1.5 bps to 0.655%.
- Fairly steady overall, the spread on the 5-year and 30-year yields flattened to 112.99 bps.
- 3-month dollar Libor continues to reach record lows, lowering -1.54 bps to 0.21788%.
- On the Treasury auction front, Wednesday’s 5-year was met with a very strong appetite, stopping at 0.275%, 1 bps lower than market expectations. The following day’s 7-year auction was also in demand, stopping at 0.462%.
- The corporate spread for the iShares iBoxx Investment Grade Corporate Bond ETF, LQD, was approximately +13bps wider this week.
- US junk bonds reported one of the largest weekly outflows since April. HYG, investors withdrew approximately $1 billion and the 1-week spread widen out approximately +41. High grade corporates faired better than junk bonds.
- Primary Issuance – Last few trading sessions, credit spreads have widened out due the uncertainty of the economy/stimulus package and rising cases of the virus.
- Year-to-date run rate is 68% ($1.55 trillion).
- Week-to-date $35 billion vs $30-35 billion expected.
Corporate New Issue Highlights
- T-Mobile USA $4 billion 4-Part Deal
- $500 million Tap of TMUS 2.05% 02/15/28 at +120
- $750 million Tap of TMUS 2.55% 02/15/31 at +140
- $1.25 billion Long 20Y Fixed (Feb. 15, 2041) at +160
- $1.5 billion Long 30Y Fixed (Feb. 15, 2051) at +187.5
- Gilead $7.25 billion 7-Part Deal
- $500 million 1Y FRN (Sept. 17, 2021) at 3mL+15
- $2 billion 3NC1 Fixed (Sept. 29, 2023) at +60
- $500 million 3NC1 FRN (Sept. 29, 2023) at 3mL+52
- $750 million 7Y Fixed (Oct. 1, 2027) at +75
- $1 billion 10Y Fixed (Oct. 1, 2030) at +100
- $1billion 20Y Fixed (Oct. 1, 2040) at +120
- $1.5 billion 30Y Fixed (Oct. 1, 2050) at +140
- B.A.T. International Finance $6.25 billion 5-Part Deal
- $1.5b Long 5Y Fixed (March 25, 2026) at +140
- $1.75b Long 7Y Fixed (March 25, 2028) at +180
- $1.25b Long 10Y Fixed (March 25, 2031) at +205
- $750m 20Y Fixed (Sept. 25, 2040) at +230
- $1b 30Y Fixed (Sept. 25, 2050) at +255
- Municipal bonds lagged treasuries this week as over $7 billion of new issuance is due out.
- Ten-year yields of state and local debt are now 122.6% of comparable treasury yields. While this ratio is historically attractive, absolute yields across the muni curve remain depressed in this low-rate cycle.
- Trading in the municipal market topped $51 billion in the last week, as traders await any action from Congress on a new stimulus plan.
- Notable upcoming deals include $758mm of a North Texas Tollway Revenue bond. Also, Louisiana will underwrite a general obligation bond.