Category: Investment Grade Weekly

08 Oct 2021

CAM Investment Grade Weekly Insights

Spreads look to finish the week unchanged as Treasury yields inch higher.  The OAS on the Blomberg Barclays Corporate Index closed at 85 on Thursday October 7 after having closed the week prior at 84 but the market is trading tighter as we go to print mid-morning on Friday October 8.  Treasury yields have moved higher with each passing day throughout the week with the yield on the 10yr Treasury now above 1.6%, 14 basis points higher than where it finished the previous week.  Some of the move higher can be attributed to the payroll report on Friday morning, with early market commentary seeming to indicate it was “just barely okay enough” for tapering to begin as soon as the Fed meets in November.  However, it is worth noting that this was a big miss as payrolls increased by just 194,000 in September versus the 500,000 estimate – the smallest payroll gain thus far in 2021.  Through Thursday, the Corporate Index had posted a year-to-date total return of -1.67% and an excess return over the same time period of +1.82%.

 

 

The primary market saw good activity during the week with $27.6bln in new bonds having been brought to market.   Activity is likely to slow as earnings season begins and estimates are calling for around $15bln next week.  According to data compiled by Bloomberg, $1,149bln of new debt has been issued year-to-date.

Per data compiled by Wells Fargo, inflows into investment grade credit for the week of September 30–October 6 were +$804mm which brings the year-to-date total to +$305bln.

27 Aug 2021

CAM Investment Grade Weekly Insights

Spreads are set to finish the week tighter, reclaiming the move wider that occurred the week prior.  The OAS on the Blomberg Barclays Corporate Index closed Thursday August 26 at a spread of 88 after having closed last week at 91 –spreads are relatively unchanged as we go to print on Friday afternoon.  The yield on the 10yr Treasury moved higher throughout the week and is trading at 1.31% at the moment, 6 basis points higher than it closed the previous week.  Through Thursday, the Corporate Index had posted a year-to-date total return of -0.55% and an excess return over the same time period of +1.46%.

It was a very slow week for corporate issuance with just $3bln in volume.  This is quite typical for this time of year and we expect more of the same next week before the spigot gets turned back on after the Labor Day holiday. According to data compiled by Bloomberg, $962bln of new debt has been issued year-to-date.

Per data compiled by Wells Fargo, inflows into investment grade credit for the week of August 19–25 were +$5.9bln which brings the year-to-date total to +$270bln.

06 Aug 2021

CAM Investment Grade Weekly Insights

Spreads are set to finish the week wider to the tune of 1-2 basis points.  The OAS on the Bloomberg Barclays Corporate Index closed Thursday August 5 at a spread of 88 after having closed the week prior at 86.  We are going to print amid a positive market tone on this Friday morning after a strong unemployment report.  The yield on the 10yr Treasury traded higher this week but most of that move occurred this morning after the aforementioned employment report.  The 10yr closed last week at 1.22% and is trading at 1.28% at the moment.   Through Thursday, the Corporate Index had posted a year-to-date total return of +0.08% and an excess return over the same time period of +1.54%.

 

 

It was the busiest week for the new issue market in over 2 months according to Bloomberg, as weekly volume eclipsed $32bln.  Next week should also see brisk issuance before things slow down at the end of August for the last salvo of summer vacations. According to data compiled by Bloomberg, $909bln of new debt has been issued year-to-date.

We have seen more of a two-way flow in the market the past several weeks.  The reopening trade has lost some steam as investors weigh the risks of the delta variant.  For most of 2021, credits levered to reopening were in the midst of a one-way trade to tighter spreads and lower yields but those credits have seen mixed and in some cases poor performance in recent trading sessions.

Per data compiled by Wells Fargo, inflows into investment grade credit for the week of July 29–August 4 were +$5.7bln which brings the year-to-date total to +$247bln.

 

02 Jul 2021

CAM Investment Grade Weekly Insights

Spreads continued to trade sideways this week, having exhibited little change, though the index itself did hit a new mark for its tightest level of the year when it closed Wednesday at a spread of 80.  The OAS on the Blomberg Barclays Corporate Index closed Thursday July 1 at a spread of 81 after having closed at the same level the week prior.  The 10yr Treasury traded slightly lower throughout the week and a payroll report on Friday that modestly beat expectations did nothing to change the direction of that trade.   Through Thursday, the Corporate Index had posted a year-to-date total return of -1.34% and an excess return over the same time period of +1.97%.

New issuance volume was light during the week which was expected given the timing of quarter end and the 4th of July holiday.  $11.9bln of new debt was priced during the week, with the bulk of that consisting of an outsize $8bln print by Salesforce.  According to data compiled by Bloomberg, $790bln of new debt has been issued year-to-date.   Consensus estimates are looking for $15-20bln of issuance next week, which will consist of only 4 trading days.

Per data compiled by Wells Fargo, inflows into investment grade credit for the week of June 24–30 were +$3.5bln which brings the year-to-date total to +$208bln.

Have a safe and enjoyable 4th of July.

 

 

 

18 Jun 2021

CAM Investment Grade Weekly Insights

Spreads touched their narrowest levels of the year this week but are slightly wider off those tights as we go to print this Friday morning.  The OAS on the Blomberg Barclays Corporate Index closed Thursday at 82, after closing the previous week at 84.  Spreads have traded in a 5 basis point range over the course of the past four weeks.  The FOMC took center stage with its meeting and commentary on Wednesday, and while most investors would agree that the Fed was more hawkish this week than it has been recently, it had little effect on Treasuries, with the biggest story being lower rates on the long end and flatter curves.  The 10yr Treasury remains wrapped around 1.46%, nearly 30 basis points lower than the highs we saw at the end of March.   Through Thursday, the Corporate Index had posted a year-to-date total return of -1.74% and an excess return over the same time period of +1.88%.

 

 

The amount of new issuance in recent weeks has been solid by historical standards but demand has been strong and frankly the market could use some more issuance to restore some two-way flow to its price action.  $22bln of new debt priced during the week  according to data compiled by Bloomberg and more than  $757bln of new debt has been issued year-to-date.

Per data compiled by Wells Fargo, inflows into investment grade credit for the week of June 10–16 were +$10bln which brings the year-to-date total to +$203bln.  According to Wells data compilation, this was the largest inflow into IG funds since September.

 

 

07 May 2021

CAM Investment Grade Weekly Insights

Spreads barely budged during the week.  The OAS on the Blomberg Barclays Corporate Index closed Thursday at 88, which was unchanged from the week prior.  Spreads remain near their tightest levels of the year across the board.  The biggest surprise this week was the payroll data that was released this Friday morning.  According to Bloomberg, the April employment report was the biggest disappointment on record in terms of downside with only 266,000 jobs created versus the consensus forecast for a 1 million job increase.  The initial reaction sent the 10yr Treasury 10 basis points lower, but those gains were quickly pared sending rates back closer to unchanged levels as we head into the Friday close.  Interestingly enough, past experience has shown that a payroll miss often leads to lower equities but stocks are higher as we go to print, with the prevailing thought that a protracted recovery will lead to continued Fed accommodation which investors read as bullish for risk assets.   Through Thursday, the corporate index had posted a year-to-date total return of -3.10% and an excess return over the same time period of +1.17%.

 

 

Issuance is starting to pick up as companies work through earnings and $25bln in new debt was priced during the week.  This was a bit of a light start given the high expectations for May, with consensus estimates looking for $150bln by month end.  Strong investor demand has led to narrow concessions across the board.  According to data compiled by Bloomberg, $573bln of new debt has been issued year-to-date.

Per data compiled by Wells Fargo, inflows into investment grade credit for the week of April 29-May 5 were +$7.2bln which brings the year-to-date total to +$149bln.

30 Apr 2021

CAM Investment Grade Weekly Insights

Spreads inched marginally tighter throughout the week.  The OAS on the Blomberg Barclays Corporate Index closed Thursday at 88 after closing the week prior at 90.  Spreads are near their tightest levels of the year across the board.  First quarter earnings season is in full swing now and Thursday was the busiest day yet, with 11% of the S&P 500 having reported on Thursday.  Earnings and economic data have been solid with 86% of S&P 500 companies that have reported so far beating estimates, according to data from Refinitiv. Treasury yields are slightly higher so far this week to the tune of 1-2 basis points.  Through Thursday, the corporate index had posted a year-to-date total return of -3.70% and an excess return over the same time period of +1.05%.


It was a muted week for the new issue market which is to be expected during the midst of earnings season.  Borrowers brought just $12.9bln of new debt during the week and $111 billion for the month of April.  The pipeline for issuance is building, however, and the consensus estimate for May issuance is $150 billion. According to data compiled by Bloomberg, $548bln of new debt has been issued year-to-date.

Per data compiled by Wells Fargo, inflows into investment grade credit for the week of April 22-28 were +$5.4bln which brings the year-to-date total to +$142.5bln.

09 Apr 2021

CAM Investment Grade Weekly Insights

Spreads exhibited little movement this week and the spread on the index looks likely to finish unchanged after it is all said and done.  The OAS on the Blomberg Barclays Corporate Index closed Thursday at 89 after closing the week prior at 89.  Spreads are very near their year-to-date tights across the board.  Treasury yields moved lower throughout the week before drifting higher on Friday.  As we go to print on Friday, the 10yr Treasury is almost 10 basis points lower from quarter end when it closed at 1.74%.  Through Thursday, the corporate index had posted a year-to-date total return of -3.77% and an excess return over the same time period of +1.07%.

Primary market issuance was subdued this week, which is customary in the days following quarter end.  Borrowers brought just $17.6bln of new debt.  According to data compiled by Bloomberg, $455bln of new debt has been issued year-to-date, with a pace of -22% relative to last year.

Per data compiled by Wells Fargo, inflows into investment grade credit for the week of April 1-7 were +$5.3bln which brings the year-to-date total to +$112.8bln.

 

 

19 Mar 2021

CAM Investment Grade Weekly Insights

Spreads regained some ground this week and are looking to finish several basis points tighter.  The OAS on the Blomberg Barclays Corporate Index closed Thursday at 96 after closing the week prior at 98.  Treasuries were unusually volatile again, with the 10yr having a range of over 10 basis points during the week.  The FOMC played a large part in driving news flow during the week with a rate decision on Wednesday and an announcement on Friday that they would allow some bank regulatory exemptions to expire at month end.  On Wednesday, Chairman Powell repeated promises to hold the Fed Funds rate at a low level in an effort to keep the economic recovery moving in the right direction.  Additionally the Fed indicated that it would not budge if inflation breached its 2% target during the year, saying it would view pockets of rising prices as transitory in nature.  The 10yr Treasury is wrapped around 1.7% as we go to print on Friday afternoon, which is near the highest level of the year.  Through Thursday, the corporate index had posted a year-to-date total return of -5.47% and an excess return over the same time period of +0.35%.

 

 

Issuance was strong again this week and will total about $30bln when it is all said and done.  Not even the opening day of the NCAA Basketball Tournament could stop things, as a couple of issuers are bringing new deals on Friday.  According to data compiled by Bloomberg, $383bln of new debt has been issued year-to-date, with a pace of +35% relative to last year.

Per data compiled by Wells Fargo, inflows into investment grade credit for the week of March 11-17 were +$3.6bln which brings the year-to-date total to +$103bln.

 

05 Mar 2021

CAM Investment Grade Weekly Insights

Spreads will finish the week comfortably wide of the year-to-date tights that we saw 2 weeks ago.  It was a volatile week for rates and spreads and the OAS on the Bloomberg Barclays Corporate Index closed at 92 on Thursday evening after ending the week prior at 90.  Treasuries were relatively calm the first two days of the week before inching higher throughout mid-week as Fed Chairman Powell delivered some dovish remarks on Thursday afternoon.  The 10yr Treasury, which traded as low as 1.39% on Monday, had risen to 1.57% into the Thursday close.  Friday morning saw the release of an employment report that topped expectations, sending the 10yr even higher, up to 1.62%, but the sell off in rates quickly faded and most of Friday afternoon was been spent wrapped around 1.55%. Through Thursday, the corporate index had posted a year-to-date total return of -4.21% and an excess return over the same time period of +0.50%.

 

 

The high grade primary market had a huge week as 45 issuers defied volatility bringing more than $65bln in new debt.  Next week also looks like it could be a big number as inflows into the investment grade market have created good demand and issuers have been happy to oblige.

Per data compiled by Wells Fargo, inflows into investment grade credit for the week of February 25-March 3 were +$4.9bln which brings the year-to-date total to +$82bln.

As we move forward, it is now all quiet on the Fed front as the blackout period on public comment is now in effect.  The Fed meets March 16-17 so the market will have an interesting test over the next 2 weeks as it must interpret data on its own as opposed to parsing Fed-speak.