Tuesday Fixed Income Markets

Secondary volume was strong today, with nearly $16B in IG issues and $7.5B in HY issues trading today (both are up 50% from yesterday).  The advance/decline issues ratios were 1.6x and 1.2x respectively.  Here is the data:

The curve (Bloomberg):



The 10s-30s curve flattened somewhat as 10s outperformed 30s, ratcheting in 16bps.  7s tightened in 17bps.

I am still a believer in credit as relative spreads (that % of yield that is comprised of spread) are still decent and the carry is obviously additive.  While I agree issuance has been big (if I were a corporate treasurer, I'd be issuing like it was going out of style) and covenants are weak (more on this soon), I am not in the "credit bubble" camp.

Using LQD as a proxy:

Up 5.9% over the last 3 months and 10.9% over the last year.  This month, however, it is down 0.17%.  Price graph (Bloomberg):

Also read a story that mortgage managers are seeking out agency paper with lower FICO scores as the folks with the underlying mortgages won't be able to refinance in the current environment.  Makes sense.

Looking at the overall market (using AGG as a proxy - Bloomberg):

Obviously bonds are quite fashionable, but there is staying power near-term as the Fed has made clear tightening is not currently on the table.

As an aside, while using ETFs are a decent proxy, I am working on getting the actual index data.  Stay tuned.