CAM Investment Grade Weekly Insights
Credit spreads moved wider this week after touching their snuggest levels of the year just 7 days ago. The Bloomberg US Corporate Bond Index closed at 84 on Thursday October 24 after closing the week prior at 81. The 10yr Treasury yield moved higher this week, cresting at a 3-month high on Wednesday. The 10yr moved from 4.08% last Friday to 4.21% through Thursday. Through Thursday, the corporate bond index year-to-date total return was +3.14%. The yield to maturity on the corporate index has inched back above 5% and closed Thursday at a YTM of 5.08%.
Economics
It was a benign week for economic data with little in the way of market moving prints. Existing home sales didn’t improve in September even as mortgage rates came down which was somewhat of a surprise but with no discernible market impact. S&P global PMI numbers were in line with expectations. Next week brings some more meaningful releases with GDP as well as personal income/spending and the all-important Core PCE. Looking ahead, the FOMC meets on November 7. Recall that there is no Fed meeting in the month of October.
Issuance
It was an underwhelming week for issuance, which is not something that we have been able to write very frequently throughout 2024. Companies priced just $12.1bln of high-grade bonds relative to the consensus estimate of $20bln. Treasury yields have moved higher over the past few weeks making issuance slightly less attractive for borrowers. We are also in the midst of corporate earnings meaning the window is closed for some companies. We expect another relatively quiet week ahead with the election fast approaching.
Flows
According to LSEG Lipper, for the week ended October 23, investment-grade bond funds reported a net inflow of +$1.88bln. This was the 13th consecutive week where the asset class reported an inflow. Total year-to-date flows into investment grade funds were +$64.6bln.
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.