CAM Investment Grade Weekly Insights
Credit spreads inched tighter this week on the back of strong demand. Investors were motivated by a flight to quality and higher all-in yields. The OAS on the Corporate Index closed at 81 on Thursday March 5th after closing the week prior at 84. Spreads are wider as we go to print on Friday morning as a result of a weak payroll report for the month of February so it is possible that the index finishes the week close to unchanged if the current trend holds. The 10yr Treasury ended last week at 3.94% and it closed at 4.14% on Thursday evening. Treasuries were volatile this week but generally higher across the board as investors anticipated inflationary impacts due to sharply higher oil prices as a result of the ongoing conflict in the Middle East. Through Thursday, the Corporate Bond Index year-to-date total return was +1.36% and the yield to maturity for the index was 4.88%.
Points of Interest
Volatility took center stage this week as investors gauged the severity and potential duration of the conflict with Iran and AI-related worries continued to weigh on certain sectors of the market. Most commodity prices are now sharply higher with WTI and Brent crude both near $90/bbl (+50% YTD). Monday and Tuesday corporate bond volume was well above average, especially for IG credit as investors were seeking safety and yield. The big economic data this week did not hit until Friday morning with the payroll report and retail sales for the month of February. Payrolls were extremely underwhelming with a -92k reduction for the month relative to a survey of +55k jobs added. Some of the payroll weakness could be related to poor weather and ongoing labor strikes but it was a weak print any way you slice it and took the shine off January’s relatively good report (+126k revised vs +65k estimate). Retail sales on the other hand came in a bit better than expectations, especially considering the poor weather across most of the US during February. The headline number was -0.2% vs the -0.3% survey but the control group showed modestly positive sales growth of +0.4%.
Primary Market
New issue supply hit >$50bln again this week but fell short of the $70bln estimate. Issuers took a breather on Monday and Tuesday due to spread and rate volatility but then returned in a big way on Wednesday and Thursday. All told it was a respectable week from a volume perspective considering the bulk of that occurred over the course of just two trading days. Syndicate desks are looking for around $60bln of issuance next week. Year-to-date new issue supply stood at $450bln through the end of the week.
Flows
According to LSEG Lipper, for the week ended March 3rd, short and intermediate investment-grade bond funds reported a net inflow of +$1.88bln. This was the 14th consecutive week of inflows. 2026 year-to-date flows into investment grade were +$33.2bln.
This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.