Author: Josh Adams - Portfolio Manager

Credit spreads look set to finish slightly wider this week with the OAS on the corporate index closing at 91 on Thursday evening after ending the week prior at a spread of 90.  The 10yr Treasury yield rose throughout the week and was 11 basis points higher during the period through Thursday but the benchmark rate is rallying amid a risk-off tone as we go to print this Friday afternoon and is currently only 3bps higher on the week.  Through Thursday, the Corporate Bond Index year-to-date total return was +1.59% while the yield to maturity for the Index closed the day at 5.24%.

Economics

Investors continue to search for answers as the economic data this week did not do much to absolve the wall of worry that continues to weigh on risk assets.

Consumer confidence data continued its decline as the Expectations Index for the month of March fell to its lowest point in a dozen years.  On the bright side, new home sales posted a modest gain for the month of February giving some hope that demand will impress during the spring selling season.  Durable goods also came in better than expectations but it is hard to feel too good about this data with uncertainty surrounding trade policy and tariffs.  On Thursday, Q42024 GDP came in stronger than estimates but accompanying trade data for February was ugly for Q12025 GDP.  Finally on Friday we got some negative news with PCE (Fed’s preferred inflation gauge) and spending data.  Inflation came in slightly hot relative to expectations and personal spending was woeful.  Time will tell if this was a temporary blip or the beginning of a weakening trend for the consumer.

Next week the data is a little lighter and less meaningful in the first part of the week before we get the March unemployment report on Friday morning.

Issuance

The primary market exceeded expectations this week as more than $41bln of new debt was priced by a bevy of eager borrowers.  Although there is one trading day left in the month that will likely have some new issuance, 2025 has already eclipsed 2024 as the busiest on record for a first quarter.

Next week is expected to be a lighter one with tariffs looming and syndicate desks are looking for just $20bln of new supply.

Flows

According to LSEG Lipper, for the week ended March 26, investment-grade bond funds reported their first net outflow of the year at -$406mm.  Total year-to-date flows into investment grade funds were +$19.66bln.

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.

Credit spreads clawed their way back from the wides of last week and are poised to finish the period tighter.  The OAS on the Corporate Index was 3 basis points tighter this week through Thursday. The 10yr Treasury yield inched lower throughout the week as investors remained wary of risk assets.  The 10yr was 7bps lower through Thursday.  Through Thursday, the Corporate Bond Index year-to-date total return was +2.49% while the yield to maturity for the Index closed the day at 5.13%.

Economics

The data this week yielded some mixed messages.  Retail sales on Monday were soft as February sales advanced just +0.2% but the bigger news was a revision of January’s data that made it the largest monthly decline since 2021.  There were some bright spots for the home construction market on Tuesday as housing starts showed a rebound for the month of February but permitting activity suggested a slowdown in future months.  Staying with the housing theme for a moment, Thursday also had a positive release for existing home sales as they surprised to the upside for February, but affordability concerns remain a headwind.  Wednesday’s FOMC release was unsurprising as the committee elected to hold rates steady.  Commentary from Chairman Powell was viewed by investors as having a dovish tilt, and we agree, but the dot plot was slightly more hawkish than the prior release.  The updated dot plot median expectations were unchanged with most members expecting 50ps worth of cuts by the end of 2025.  However, examining the details, there were more policymakers expecting zero or just one cut than there were in December.  Recall that the Summary of Policy Expectations (dot plot) is released every three months so we will not get our next update until the FOMC release on June 18.

There are now plenty of diverging views among investors and street economists with regard to the Fed’s policy rate.  At Thursday’s close, interest rate futures were pricing 2.7 cuts by the end of 2025.  There are some strategists predicting no cuts at all and then there are those in the recession/slow down camp that are predicting 3+ cuts.  There were some calling for hikes but they seem to have gone into hiding for now.  We view this Fed as being data dependent with a dovish bias and believe that 1 or 2 cuts before the end of 2025 as the most likely outcome.

Next week brings plenty to parse with new home sales, consumer confidence, durable goods, GDP, personal consumption, and finally on Friday we get the Fed’s preferred inflation gauge with the release of Core PCE.

Issuance

The new issue market for corporate bonds was in line with expectations this week as borrowers priced $33bln of new debt relative to the $35bln estimate.  Concessions were narrower this week amid a more positive backdrop for credit than what we saw for most of the prior two weeks.  YTD activity has been brisk thus far with $490bln of new issue, just -2% off 2024’s pace.  Next week, syndicate desks are looking for around $30bln of new supply.

Flows

According to LSEG Lipper, for the week ended March 19, investment-grade bond funds reported a net inflow of +$336mm.  Total year-to-date flows into investment grade funds were +$20.07bln.

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.

Credit spreads moved meaningfully wider this week in sympathy with the rout in equities but the credit market has a more optimistic vibe as we go to print Friday morning.  The OAS on the Corporate Index was 10 basis points wider on the week, closing at 97, its widest level of 2025 and the widest going back to early September 2024.  It is worth noting that the move in credit spreads was extremely orderly relative to equities and the new issue market remained open.  The 10yr Treasury was relatively stable during the week, especially compared to risk assets.  The benchmark rate was 3bps higher on the week through Thursday.  Through Thursday, the Corporate Bond Index year-to-date total return remained in positive territory at +1.73% while the yield to maturity for the Index closed the day at 5.22%.

Economics

Investors remained focused on the possibility of a slowing U.S. economy as they watched the data this week.  Midweek headline CPI and PPI prints came in lower than expectations.  These releases are not as meaningful to the FOMC as February PCE which will be released on March 28.  Friday brought some gloomy data with the release of the U-Mich. Consumer sentiment data which showed that consumer long-term inflation expectations hit a 32-year high.

Next week’s focus will be on retail sales, housing starts and the FOMC meeting.  Interest rate futures are pricing in a 99+% chance of no change in the Fed’s policy rate at the conclusion of that meeting on Wednesday.  Looking ahead, traders expect ~2.7 cuts before year end with them likely occurring in June and September.  To be clear, market sentiment and economic data can send those expectations in either direction at any given time.

Issuance

The new issue market remained active and healthy this week amid heightened volatility.  Companies priced $35bln in new bonds which fell short of the $45bln estimate.  Both Monday and Thursday saw some issuers stand down preferring to wait for quieter days to tap the market.  Syndicate desks are looking for around $35bln of issuance next week and Monday is poised to be especially busy as rumor has it that more than a dozen companies will look to front-run the FOMC meeting if the tone is receptive.  Issuers have historically avoided bringing new deals coincident with FOMC releases just to avoid any market surprises from the release itself or the ensuing press conference.

Flows

According to LSEG Lipper, for the week ended March 12, investment-grade bond funds reported a net inflow of +$942mm.  Total year-to-date flows into investment grade funds were +$19.74bln.

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.

Credit spreads showed some stability this week which was impressive given the deluge of new issue supply.  It looks as though the period will finish on a positive note based on price action this Friday morning.  The OAS on the Corporate Index was unchanged at 87 basis points this week through Thursday.  The 10yr Treasury yield rallied on Monday amid a risk-off sentiment before inching higher throughout the rest of the week.  The benchmark rate was 7bps higher on the week through Thursday.  Through Thursday, the Corporate Bond Index year-to-date total return was +2.10% while the yield to maturity for the Index closed the day at 5.15%.

Economics

Growth concerns were top of mind for market participants this week and Monday’s PMI report enforced some of those fears as the overall index came in lighter than expectations with a big jump in the Prices Paid component, likely due to the potential impact of tariffs.  On the positive side, the ISM service index release showed an increase and it has now expanded in 54 of the past 57 months.  Finally, Friday’s payroll report was slightly lower than expected in terms of jobs added during February and the unemployment rate ticked higher from 4.0% to 4.1% but both numbers were well within the margin of error and stocks actually staged a brief relief rally on the back of the release.

Next week has some economic prints of note.  Things start to ramp up on Wednesday with a CPI release followed by PPI measures on Thursday.  Looking further ahead, the FOMC will meet for the first time since the end of January on March 19.

Issuance

There were lofty expectations ($50bln) for issuance this week and they were exceeded in a big way.  Mars Inc. led the way with a $26bln jumbo deal enroute to a $73bln week that saw dozens of companies tap the market.  It was the busiest week for the primary market since the first week of September 2024 when $80bln printed.  Syndicate desks are looking for more action next week with estimates calling for $45bln in new supply.  Investors have plenty of cash to put to work and are still finding good value with most borrowers paying more than 5% to issue intermediate bonds.  Looking at it from the standpoint of the borrowers, costs are elevated relative to the low-rate era but the cost of capital is still reasonable for large healthy companies when viewed through the lens of an overall capital allocation framework.  This has served to create a win-win type of environment for both investors and borrowers. Year-to-date issuance has now surpassed $420bln which just slightly trails (-3% y/y) 2024’s pace.

Flows

According to LSEG Lipper, for the week ended March 5, investment-grade bond funds reported a net inflow of +$2.6bln.  Total year-to-date flows into investment grade funds were +$18.8bln.

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.

Credit spreads finally experienced their first bout of widening in 2025.  Now, to be clear, we are not talking about much of a move in the grand scheme of things. Although the index closed Thursday at its widest level of 2025 it sits only 7 basis points off the tights.  The OAS on the Corporate Index moved 4 basis points wider week over week through Thursday February 27.  The 10yr Treasury yield rallied hard and moved 17 basis points lower over the same time period.  Through Thursday, the Corporate Bond Index year-to-date total return was +2.29% while the yield to maturity for the Index closed the day at 5.12%.

Economics

Tuesday saw a pessimistic consumer confidence print as the measure posted its biggest drop since 2021 and is now sitting at an eight-month low.  This prompted Treasury yields to move lower.  On Wednesday we got data that showed that elevated mortgage rates and bad weather continued to weigh on new home sales, as they declined 10.5% during January.  On Thursday the durable goods release was solid but some areas were weak and it may be that the pop in the indicator was an attempt by buyers to get ahead of tariffs.  Friday the data was mixed as inflation came in line with expectations while income surprised to the upside but spending underwhelmed.

Next week the highlights include ISM manufacturing/services, auto sales and the unemployment report for the month of February.

Issuance

It was another solid week of issuance as wider spreads did nothing to stop issuer enthusiasm.  More than $51bln of new debt was priced during the last week of February, pushing the monthly total to nearly $161bln.  Note that this is 8% shy of what dealers were expecting for the month ($175bln) but was still the second busiest February on record, eclipsed only by last year’s total of $197bln.  Year-to-date issuance has now eclipsed $347bln.

With the move lower in Treasury yields more than offsetting the move wider in spreads the funding environment is as attractive as it has been at any point this year.  Next week could get things off to a hot start for the month of March with more than $50bln of issuance.

Flows

According to LSEG Lipper, for the week ended February 26, investment-grade bond funds reported a net inflow of +$2bln.  Total year-to-date flows into investment grade funds were +$16.2bln.

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.

Credit spreads remained near their tightest levels of 2025 during the holiday shortened week.  The option adjusted spread of the Bloomberg US Corporate Bond Index closed at 78 on Thursday February 20 after closing the week prior at the same level.  The 10yr Treasury yield did not exhibit much change during the week and was 3 basis points lower on the week through Thursday evening.  Through Thursday, the Corporate Bond Index year-to-date total return was +1.15% while the yield to maturity for the Index closed the day at 5.28%.

Economics

The highlight of an otherwise quiet week was the Wednesday release of the minutes from the January FOMC meeting.  The minutes showed that the majority of policymakers believed that inflation was somewhat elevated and that they needed to see continued disinflation in order to be confident about the longer term 2% target.  As of Friday morning, interest rate futures were pricing almost no chance of a cut at the March meeting which is just less than a month away.  Futures were pricing in a 24% cut at the May meeting and a 41% chance in June.  All told, traders are still expecting roughly 1.7 cuts before the end of this year (between 1 and 2).  Recall that the dot plot released at the end of December showed a median expectation from the FOMC of 2 cuts in 2025.  A new dot plot will be released at the March meeting.

Next week will be incredibly busy as far as economic releases are concerned.  Prints that have market moving potential include GDP, Core PCE and Personal Income/Spending on Thursday and Friday.

Issuance

New corporate issuance handily topped the estimate of $40bln on the week with the finally tally coming in at more than $52bln. This was an especially impressive haul considering that the market was closed on Monday in observance of President’s Day.  Concessions ticked higher this week as new issuers paid about 5bps for new bonds relative to secondary issues.  Syndicate desks are looking for around $30bln of new supply next week as February comes to a close.

Flows

According to LSEG Lipper, for the week ended February 19, investment-grade bond funds reported a net inflow of +1.82bln.  Total year-to-date flows into investment grade funds were +$14.2bln.

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.

Credit spreads remained near their tightest levels of 2025 during the week.  The option adjusted spread of the Bloomberg US Corporate Bond Index closed at 79 on Thursday January 30 after closing the week prior at 78.  The 10yr Treasury yield moved lower on Monday morning and then traded in a tight range thereafter.  The benchmark rate was 10 basis points lower on the week as we went to print Friday morning.  Through Thursday, the Corporate Bond Index year-to-date total return was +0.75% while the yield to maturity for the Index closed the day at 5.29%.

Economics

It was a very busy week for economic releases that also included an FOMC meeting.  On Tuesday we got a positive indicator as demand for core capital goods rose more than expected in December.  However, data on that very same day showed that consumer confidence declined in the month of January.  Wednesday’s Fed meeting was in-line with expectations as the central bank held rates steady and signaled that it is in no hurry to cut rates further. Recall that the Fed’s last dot plot in December showed the median expectation of just 50bps worth of rate cuts in 2025.  There are now some economists on the street with out of consensus calls looking for no cuts at all or possibly even rate hikes if inflation surprises to the upside.  Thursday’s GDP release showed that the U.S. economy ended 2024 on a solid note, expanding at a +2.3% annualized rate in the fourth quarter of the year.  Finally on Friday, we got the Fed’s preferred inflation gauge with core PCE coming in at +2.8%, which was on the mark relative to forecasts.  The consumer spending portion of the data release was strong for the second consecutive month but this was balanced out by the savings rate which dipped to a two-year low.

Next week is another busy one with ISM manufacturing/services and a host of other eco-prints.  The finale will come on Friday morning with the January unemployment report.

Issuance

New corporate issuance beat estimates this week, topping $31bln.  The monthly total also eclipsed the $175bln dealer forecast coming in at $186.4bln for January.  This was just $3bln less than the record-breaking January 2024 tally.  Syndicate desks are looking for February to be a strong month as well with forecasts predicting $175bln of new debt.

Flows

According to LSEG Lipper, for the week ended January 29, investment-grade bond funds reported a net inflow of +1.34bln.  Total year-to-date flows into investment grade funds were +$5.29bln.

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.

Credit spreads for most bonds were unchanged on the week as the Index has exhibited little movement in either direction thus far in 2025.  The Bloomberg US Corporate Bond Index closed at 80 on Thursday January 16 after closing the week prior at the same level.  The 10yr Treasury made a meaningful move lower in yield this week on the back of cooler than expected inflation data.  The benchmark yield moved from 4.76% last Friday to 4.61% at the close on Thursday January 16.  Through Thursday, the Index year-to-date total return was -0.06% while the yield to maturity for the Index closed the day at 5.37%.

Economics

The economic calendar was busy this week.  First CPI came in as a modest surprise to the downside with core CPI coming in softer than expectations.  This sparked a rally in Treasuries, driving rates lower.  December retail sales were solid, boosting investor confidence in the consumer, but the number was not so good that it ignited fears about the economy overheating.  Finally, the housing market showed signs of life on Friday morning with the release of December housing starts data that surprised to the upside in a big way.  The housing data wasn’t all roses though as permits did decline signaling that early 2025 releases may not keep pace with December. Next week is pretty light on data with no significant economic releases.  Looking further ahead, the next FOMC decision is on January 29.  Interest rate futures markets were pricing in a >99% chance that the Fed will hold rates steady at that meeting at the time of our publication.

Issuance

It was a busy week for issuance this week as the banking sector started to report earnings, freeing up their chance to issue new debt.  Weekly volume topped the $40bln estimate, coming in just shy of $57bln as Bank of America printed $10bln of new debt on Friday on the heels of $25bln of bank issuance on Thursday.  Next week the bond market is closed on Monday in observance of Martin Luther King Jr. Day.  Dealers expect $25bln of issuance next week but we would not be surprised to see a larger number amid a constructive funding environment.

Flows

According to LSEG Lipper, for the week ended January 15, investment-grade bond funds reported a net inflow of +591.8mm.  Total year-to-date flows into investment grade funds were +$3.01bln.

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.

Credit spreads traded sideways this week, remaining near year-to-date tights.  The Bloomberg US Corporate Bond Index closed at 78 on Thursday December 5 after closing the week prior at the same level.  The 10yr Treasury is less than 1bp higher over the course of the past week, closing at 4.169% last Friday and 4.176% through Thursday.  Through Thursday, the corporate bond index year-to-date total return was +4.49%.  The yield to maturity for the IG corporate bond index closed at 5.02% on Thursday.

Economics

The economic calendar had numerous releases this week but there were no meaningful surprises.  The big data point of the week was the employment report on Friday morning which was solid but not spectacular.  Taking it altogether, the data this week kept the Fed on course to cut rates at its meeting on December 18.  Interest rate futures were pricing a 91% chance of a cut as of 10:00am on Friday morning.  This was up from 66% a week ago.  Looking ahead to next week, the biggest economic release is CPI on Wednesday morning.

Issuance

Issuance this week was in-line with expectations as 27 companies priced $23.2bln in the primary market relative to the consensus estimate of $25bln.  This type of volume is considered very health for the month of December when the calendar can tend to be more inconsistent than other months.  Syndicate desks are looking for $15bln of issuance next week which will likely be biased toward Monday-Tuesday as companies look to get ahead of Wednesday’s CPI print.

Flows

According to LSEG Lipper, for the week ended December 4, investment-grade bond funds reported a net inflow of +$2.04bln.  Total year-to-date flows into investment grade funds were +$78bln.

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.

Credit spreads were largely unchanged during the week.  The Bloomberg US Corporate Bond Index closed at 78 on Thursday November 21 after closing the week prior at the same level.  The 10yr Treasury was also little changed during the period, closing at 4.44% last Friday and 4.42% this Thursday.  Through Thursday, the corporate bond index year-to-date total return was +2.50%.  The yield to maturity for the IG corporate bond index closed at 5.25% on Thursday.

Economics

It was an extremely light domestic economic calendar this past week with little of note.  Next week brings much more data to parse and Wednesday in particular is action packed with releases for GDP, personal consumption, consumer spending, durable goods and Core PCE.  This is the last time the Fed will get a look at its preferred inflation gauge prior to the FOMC rate decision on December 18.  As of Thursday evening, interest rate futures were pricing in a 56% chance of a 25bp cut at the December meeting.

Issuance

It was a brisk week for issuance as borrowers brought nearly $37bln of new debt to market.  Next week dealers are projecting $15-$20bln of issuance.  If that tally comes to fruition, then we would expect the bulk of that supply to occur on Monday before activity starts to slow as the calendar progresses toward the Thanksgiving holiday.

Flows

According to LSEG Lipper, for the week ended November 20, investment-grade bond funds reported a net inflow of +$4.6bln.  This was the largest weekly inflow since January of 2023.  Total year-to-date flows into investment grade funds were +$75.3bln.

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.