The Credit markets in August topped expectations, pricing $107.495Bln on projections of $95Bln. The New Issue calendar has topped expectations for 8 straight months. The U.S. Treasury market saw 2’s-10’s close flat, while 2’s-30’s closed the month positively sloped +29 basis points. Spreads were 5 to 30 basis points tighter and traded in a 20-55 basis point range.

August saw solid secondary trading activity as lower rates had investors selling credit to buy the new issue calendar once again. In mid-August the credit markets experienced heightened volatility and shifting sentiment among investors. We saw a sharp risk-off trade due to increasing concerns about a slowdown in the U.S. economy.

All risk assets were affected as a flight to quality trade took place, and yields fell as investors put on safe-haven trades. As the month progressed the markets recovered, and we saw a normalization of risk assets into month end. The month saw $2.8Bln of Net Client selling continuing the trend of the 1st half of the year that saw heavy net client selling.

 

 

IIG Credit spreads in August were 5-30 basis points tighter and spreads traded in a 20-55 basis point range. The US Treasury market saw 2yr notes lower by -25 basis points, 10yr notes lower by -8 basis points and the 30yr closed the month -9 basis points lower.

Looking at U.S. Treasury rates in August, we saw the month begin with 2’s — 10’s inverted by 17 basis points and 2’s — 30’s positively slopped at +11 basis points, closing the month with 2’s — 10’s Flat and 2’s — 30’s positively slopped at +29 basis points.

As we look at the markets, the Fed held rates steady at their last meeting in July and are poised and signaling a rate cut on September 18th, the bigger question seems; is it 25Bps or 50Bps cut.

The CDX index opened August ’24 at 54.8 and traded to the MTD high of 61.4 on 8/07/24 and then steadily moved to the MTD low of 49.4 before closing the month at 49.8 on 8/30/24. (Charts Below)

The Bloomberg Barclays US Agg Avg Oas opened August 24’ at .98 and traded to the MTD high of 1.11 on 8/05/24, and then steadily traded lower to .94 on 8/23/24 before closing the month at .93 on 8/30/24.

The avg spread for the month was .99 The Bloomberg Barclays US Agg Oas began January 23’ at 1.32 (Charts Below)

 

 

 

 

 

IG credit flows in August came in at $694Bln vs trailing months; July $691Bln, June $592Bln, May $659Bln, April $757Bln, March $700Bln, February $717Bln, and January $742Bln. The trailing 6-month avg volume is $682billion.

Spreads were 5-30 basis points tighter in August, as lower rates and a steady flow of new issues pushed credit tighter. August saw just $2.8Bln of net client selling as investors continued the selling trend we saw in January, February, March, May, June, and July. On the credit curve in August net client selling was seen in 12-30yr paper, with $3.4Bln and 7-12yr paper with $1.8Bln while 3-7yr, 1-3yr and 0-1yr paper saw net client buying.

Health Care, Financials, Utilities and Consumer Staples led the charge in net client selling, while Consumer Discretionary, Communications and Technology all saw net client buying. Looking at the markets from a ratings perspective, Baa1/Baa3 paper saw all the net client selling with $4.2Bln. (See IG Credit Flow charts on the next page)

 

 

The month of August saw a solid month of new deals that topped expectations and strong secondary trading flows continued with net client selling. U.S. Treasuries saw another month of heavy rate moves, resulting in lower yields along with tighter credit spreads.

The U.S. Treasury curve saw 2’s 10’s close flat and 2’s 30’s closed positively slopped by +29Bps. We closed August with the Fed signaling we will see a rate cut in September, and potentially seeing a total of 2-3 rate cuts for 2024 if the data continues to cooperate.

The month of September in credit will see several things that may impact the market, starting with interest rate volatility and ongoing Fed policy, economic uncertainty along with global growth concerns, as well as higher debt levels as companies have taken on significant debt in recent years.

Geo-political headwinds will be the headlines for the remainder of the year 2024, as we are now inside 65 days until the Presidential election.

As we begin the month of September, we expect Unemployment data on Friday and other upcoming key data reports. The new issue calendar is calling for $125Bln for the month of September.

Great job by the Amerivet Securities team in August as we were a Co-Manager on $1.1Bln 2-part deal for PSE&G, $600mm deal for So Cal Gas, $5Bln 5-part deal for Eli Lilly, and $1Bln deal for Duke Energy. The Amerivet Securities sales team continues to bring in a large volume of differentiated orders from Tier II & Tier III accounts on new issue deals.