CAM INVESTMENT GRADE WEEKLY INSIGHTS

It was another strong week for IG credit. The OAS on the Bloomberg Barclays Corporate Index opened the week at 147 and tightened to 143 through the close on Thursday evening. The tone remains positive in the market this Friday morning as the 2019 risk rally continues. The OAS on the index finished 2018 at 153 and closed as wide as 157 on January 3rd, during the first holiday shortened week of 2019. Since January 3rd, the spread on the corporate index has closed tighter 8 of the last 10 trading days, moving from 157 to 143. For historical context, the three and five year average OAS for the index is 124 and 126, respectively, while the average since OAS since 1988 inception is 134.

According to Wells Fargo, IG fund flows during the week of January 10-January 16 were +$547mm. Per Wells data, YTD fund flows stand at +$2.7 billion. To recap 2018’s action, flows during the month of December were the second largest notional outflow on record at -$26bln and the largest since June of 2013 when -$27.4bln flowed from IG funds.

The primary market is alive and well, as $25.65bln in corporate bonds were printed during the week. According to data compiled by Bloomberg, borrowers are paying less than 5bps in new issue concession, down from as much as 25bps at the beginning of the year. Narrowing concessions support the thesis that the market is wide open and investor demand is robust. Corporate issuance in the month of January has now topped $77bln.