August Credit Snapshot
The credit markets in August missed monthly expectations, as the summer slowdown kicked in and volatility dissipated for the third straight month. The new issue market saw $64.53Bln, missing expectations by 24%, as the month was expecting $85Bln. The U.S. Treasury market saw 2’s—10’s and 2’s-30’s closed less inverted in August. Spreads were unchanged to 20 basis points wider and traded in a 10-40 basis point range.
August saw light secondary trading activity as markets were in summer mode after digesting July’s Fed rate hike and mixed second quarter earnings. We saw very light net client selling, with August coming in at just $780mm on wider spreads. The markets now look to September and potentially another Fed rate hike on September 20. The banking sector remains under scrutiny as the Regional Banks and Money Center Banks deal with proposed increases in capital requirements which could impact issuance in the final months of the year.
Issuance Stats
| Issuance Stats | IG (ex-SSA) Total |
| MTD | $64.53Bln |
| YTD | $853.84Bln |
Supply Run Rate
| IG Gross (ex-SSA) | YTD |
| 2023 | $853.84Bln |
| 2022 | $913.69Bln |
IG credit spreads were unchanged to 20 basis points wider and traded in a 10-40 basis point range on the month, just off the YTD lows for spreads seen in July. The U.S. Treasury market saw 2yr notes lower by -6 basis points, 10yr notes higher by +5 basis points and the 30yr closed the month 10 basis points higher.
Looking at U.S. Treasury rates in August we saw the month begin with 2’s — 10’s inverted by 87 basis points and 2’s — 30’s by 81 basis points, closing the month with 2’s — 10’s inverted by 76 basis points and 2’s — 30’s inverted by 65 basis points. The Fed has raised rates 500+ basis points since March of 2022 and September 20 will potentially be in play again for another rate hike. The Fed will have September’s unemployment data, along with key CPI and PPI reports prior to their Fed meeting, to see if they need another hike to get inflation under control.
The CDX index opened the month at 64.5 and traded to the months high on 8/18/23 of 71.1, steadily moved tighter to 62.8 on 8/30/23 (the YTD low) and then closed at 64.15 on 8/31/23. The Bloomberg Barclays U.S. Aggregate Average OAS opened the month at 1.15 and traded to the months high of 1.24 on 8/17/23 and 8/18/23. The index pushed lower into month-end and closed at 1.18 on 8/31/23. The average spread for the month was +1.20. See charts below for more information.
See charts on the following page for more information.
U.S. Treasury Moves
1/31/22 to 8/31/23
| 2yr U.S. Treasury | 10yr U.S. Treasury | 30yr U.S. Treasury | |||
| 1/31/22 | 1.18% | 1/31/22 | 1.79% | 1/31/22 | 2.11% |
| 12/01/22 | 4.25% | 12/01/22 | 3.53% | 12/01/22 | 3.64% |
| 12/15/22 | 4.23% | 12/15/22 | 3.44% | 12/15/22 | 3.48% |
| 12/30/22 | 4.41% | 12/30/22 | 3.88% | 12/30/22 | 3.97% |
| 1/03/23 | 4.40% | 1/03/23 | 3.79% | 1/03/23 | 3.88% |
| 1/17/23 | 4.18% | 1/17/23 | 3.53% | 1/17/23 | 3.64% |
| 1/31/23 | 4.21% | 1/31/23 | 3.52% | 1/31/23 | 3.65% |
| 2/01/23 | 4.09% | 2/01/23 | 3.39% | 2/01/23 | 3.55% |
| 2/13/23 | 4.52% | 2/13/23 | 3.72% | 2/13/23 | 3.79% |
| 2/28/23 | 4.81% | 2/28/23 | 3.93% | 2/28/23 | 3.92% |
| 3/01/23 | 4.89% | 3/01/23 | 4.01% | 3/01/23 | 3.79% |
| 3/15/23 | 3.93% | 3/15/23 | 3.51% | 3/15/23 | 3.70% |
| 3/31/23 | 4.06% | 3/31/23 | 3.48% | 3/31/23 | 3.67% |
| 4/03/23 | 3.97% | 4/03/23 | 3.43% | 4/03/23 | 3.64% |
| 4/14/23 | 4.08% | 4/14/23 | 3.52% | 4/14/23 | 3.74% |
| 4/28/23 | 4.04% | 4/28/23 | 3.42% | 4/28/23 | 3.67% |
| 5/01/23 | 4.14% | 5/01/23 | 3.59% | 5/01/23 | 3.84% |
| 5/15/23 | 3.99% | 5/15/23 | 3.50% | 5/15/23 | 3.84% |
| 5/31/23 | 4.39% | 5/31/23 | 3.63% | 5/31/23 | 3.84% |
| 6/01/23 | 4.33% | 6/01/23 | 3.61% | 6/01/23 | 3.84% |
| 6/15/23 | 4.62% | 6/15/23 | 3.72% | 6/15/23 | 3.85% |
| 6/30/23 | 4.89% | 6/30/23 | 3.83% | 6/30/23 | 3.86% |
| 7/3/23 | 4.94% | 7/3/23 | 3.86% | 7/3/23 | 3.87% |
| 7/14/23 | 4.74% | 7/14/23 | 3.83% | 7/14/23 | 3.90% |
| 7/31/23 | 4.87% | 7/31/23 | 3.95% | 7/31/23 | 4.01% |
| 8/01/23 | 4.92% | 8/01/23 | 4.05% | 8/01/23 | 4.11% |
| 8/15/23 | 4.92% | 8/15/23 | 4.21% | 8/15/23 | 4.32% |
| 8/31/23 | 4.86% | 8/31/23 | 4.10% | 8/31/23 | 4.21% |
CDX Investment Grade Index August 2023
CDX Investment Grade Index August 2023
Bloomberg Barclays U.S. Aggregate Corporate Average OAS 1/1/21 to 8/31/23
IG credit flows came in at $551Bln vs trailing months, July $517Bln, June $577Bln, May $619Bln, April $505Bln, March $683Bln, February $617Bln, January $620Bln. The trailing six-month average volume is $575Bln.
Spreads moved wider in August, after a steady summer move tighter in June and July, and we saw very light net client selling as the new issue calendar missed expectations. August saw just $780mm of net client selling, which was nowhere near the massive stream of selling we saw in July or May.
The 7-12yr, 12yr and longer and 3-7yr parts of the credit curve led the selling, while 0-1yr and 1-3yr paper saw over $2.7Bln of net client buying, respectively. Utilities, Technology and Financials lead the charge in net client selling while Communications, Health Care, Industrials and Energy saw light net client buying.
Looking at the markets from a ratings perspective, Baa1/Baa3 and Aaa paper saw net client selling of $1.4Bln with all other investment grade ratings seeing light net client buying. See IG credit flow charts below for more information.
See IG credit flow charts on the following page for more information.
IG Credit Flows by Sector August 2023
IG Credit Maturity Flows August 2023
IG Credit by Investment Grade Ratings August 2023
August’s new issue calendar missed monthly expectations by 24%, while the U.S. Treasury curve saw the 7 long end in rates move higher and the short end rallied, with a curve that flattened. We saw light secondary trading flows in a quiet summer month with light net client selling. As the last week of August closed out, we saw higher long end U.S. Treasury yields, along with wider spreads, but we are just off the YTD tights for spreads after a solid move tighter in June and July.
The U.S. Treasury curve saw 2’s 10’s close inverted by 76 basis points and 2’s 30’s inverted by 65 basis points. As we begin September, investors turn their attention to the unemployment data released last Friday, and key CPI and PPI reports. We have spreads just off the YTD tights, the Fed potentially getting to the end of rate hikes and the economy remains strong yet bumpy.
September’s new issue calendar is expected to be solid with $120Bln expected for the month and the first week of September is expecting $50bln in the holiday shortened week. Issuers will likely try to get deals done prior to the Federal Reserve meeting on Sept. 20. The past two years, the opening days of September have been some of the busiest of the year, with borrowers selling $77Bln and $51Bln in the four days following Labor Day in 2021 and 2022, respectively.
Great job by the AmeriVet Securities team in August as we were a Sr. Co-Manager on $5Bln three-part 5yr deal for Wells Fargo Bank, Co-Manager on $900mm 1st Mtg Bond for Public Service Electric and Gas, CoManager $600mm 5yr 1st Mtg Green Bond for San Diego Gas & Electric, Co Manager $2.95Bln four-part deal for Thermo Fisher and Co-Manager on $2Bln three-part deal for McDonald’s.
The AmeriVet Securities sales team continues to bring in a large volume of differentiated orders from Tier II and Tier III accounts on new issue deals.