CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended March 15th, investment grade funds posted a net inflow of $451.607m. Per Lipper data, the year-to-date net inflow into investment grade funds is just shy of $30bn through March 15th. Per Wells Fargo, investment grade corporate issuance through Thursday was 25.4bn, up +14% y/y.

(Bloomberg) Fed Notches a Win in Central Bank Battle With Markets on Outlook

• That’s the takeaway from the past three weeks, which have shown the Federal Reserve regaining command of the outlook for U.S. monetary policy. Traders have moved more into step with Fed officials’ dot-plot chart for projected interest-rate increases — a big contrast from last year, when the market called the central bank out on its plans for four rate hikes.
• The difference can be most clearly seen with the Fed, which began 2016 with an expectation to raise its benchmark four times. Futures traders gave that outcome just 14 percent odds, and proved right to do so — in the end, there was only the one quarter-point move. This year began with the market again disbelieving the Fed and its outlook for three hikes, placing minority odds on that many moves. Now, the probability is around 57 percent.
• “The latest market reactions to the FOMC decision seems to suggest that there is a great deal of credibility in the r* being low,” said Stephen Jen, the London-based chief executive of hedge fund Eurizon SLJ Capital Ltd., using the economics term for equilibrium interest rate.
• For now at least, the mood music is shifting the way of central banks as policy makers adapt to the improving world economy. That offers officials a respite to work on the next big challenge: whether and how to shrink their gargantuan balance sheets.

(8-K Filing) VEPCO brings a new 10yr bond

• On March 13, 2017, Virginia Electric and Power Company (the Company) entered into an underwriting agreement (the Underwriting Agreement) with Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Wells Fargo Securities, LLC, as Representatives for the underwriters named in the Underwriting Agreement, for the sale of $750,000,000 aggregate principal amount of the Company’s 2017 Series A 3.50% Senior Notes due 2027. Such Senior Notes, which are designated the 2017 Series A 3.50% Senior Notes due 2027, are Senior Debt Securities that were registered by the Company pursuant to a registration statement on Form S-3 under Rule 415 under the Securities Act of 1933, as amended, which registration statement became effective on December 19, 2014 (File No. 333-201153). A copy of the Underwriting Agreement, including exhibits thereto, is filed as Exhibit 1.1 to this Form 8-K.

(Bloomberg) Oil Set for Weekly Gain as Saudis Say Willing to Extend Curbs

• Nationwide crude inventories decline from record weekly level
• Saudi Arabia says output cuts may be extended beyond June
• Oil last week broke below $50 a barrel for the first time since December as rising U.S. output countered production curbs by members of the Organization of Petroleum Exporting Countries and other nations. While markets are still struggling to clear a surge in supply from OPEC at the end of 2016, compliance with the cuts remains above 90 percent, the International Energy Agency said.
• “The recovery at this stage remains fragile,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “The market managed to find support at key levels following a small drop in U.S. crude inventories. We are very likely to see an extension to the current production-cut deal if the aim is to bring stocks down to the five-year average.”