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June Credit Snapshot

The Credit markets in June topped expectations, pricing $102.075Bln on projections of $90Bln. YTD, the New Issue calendar has topped expectations for 6 straight months. The U.S. Treasury market saw 2’s– -10’s close inverted by 36 basis points, while 2’s-30’s closed inverted by 20 basis points. Spreads were unchanged to 20 basis points wider and traded in a 10-25 basis point range. June saw decent secondary trading activity as lower rates had investors selling credit to buy the new issue calendar once again but on a smaller scale into Qtr-End and the end of the 1st half of the year. The Fed began the year super-charging risk assets and pushing spreads tighter and yields lower, but the recent Fed meetings and key inflation data has cooled the rate cut talk and the Fed governors continue to walk back comments that have shifted the start date for rate cuts and the number for the year remains uncertain. The month saw $3.9Bln of Net Client selling continuing the trend of the 1st half of the year that saw heavy net client selling. The second half of the month saw heavy net client selling and U.S. Treasury yields rose from the mid-month lows as portfolio managers adjusted weightings into the end of the 1st half of the year. The rally in spreads was put on hold in June and we saw wider spreads. The first half of the year has seen companies sell the second highest amount of U.S. investment grade bonds to start the year, trailing only the covid year of 2020 when over $1Trl was sold in the 1st half of the year. See charts below for more information.

IG Credit spreads in June were unchanged to 20 basis points wider and spreads traded in a 10-25 basis point range. The US Treasury market saw 2yr notes lower by -7 basis points, 10yr notes lower by -2 basis points and the 30yr closed the month unchanged. Looking at U.S. Treasury rates in June we saw the month begin with 2’s — 10’s inverted by 41 basis points and 2’s — 30’s inverted by 27 basis points, closing the month with 2’s — 10’s inverted by 36 basis points and 2’s — 30’s inverted by 20 basis points. As we look at the markets, the Fed held rates steady at the June 12th meeting and are scheduled to meet again on July 31st and are widely expected to pause again and continue to monitor inflation data. The CDX index opened June ’24 at 50.04 and traded in a tight range until June 12th hitting the month low of 49.57 and then spiked to 53.70 on June 14th. After June 14th, the CDX index steadily moved higher hitting the monthly high of 54.6 on 6/26/24 and then closed the month at 53.70 on 6/28/24. (Charts Below) The Bloomberg Barclays U.S. Agg Avg Oas opened June 24’ at .86 and steadily traded higher to .93 on June 17th and then moved to the MTD high of .95 on 6/25/24 before closing the month at .94 on 6/28/24. The avg spread for the month was +91 and the avg spread for the 1st half of 2024 was .92 The Bloomberg Barclays US Agg Oas began January 23’ at 1.32. See charts below.

CDX Investment Grade Index June 2024

CDX Investment Grade Index June 2024

Bloomberg US Agg Corporate Avg OAS 01/01/21—-6/28/24

Bloomberg Barclays US Agg Corporate Avg OAS  01/01/02—06/30/24

 

IG credit flows in June came in at $592Bln vs trailing months, May $659Bln, April $757Bln, March $700Bln, February $717Bln, and January $742Bln. The trailing 6-month avg volume is $694Bln. Spreads were unchanged to 20 basis points wider in June, as slightly lower rates and a month topping new issue calendar pushed credit wider into month end and the end of the 1st half of the year. June saw $3.9Bln of net client selling as investors sold credit for the month continuing the trend we saw in January, February, March, and May. On the credit curve in June, net client selling was seen in 12yr and longer paper with $5.4Bln and 3-7yr paper $2.5Bln. Net client buying was seen in 0-1yr paper with $2.8Bln, 7-12yr paper with $1.2Bln and 1-3yr paper with $108mm. Health Care, Utilities and Materials led the charge in net client selling with Consumer Discretionary, Financials and Energy seeing light net client buying. Looking at the markets from a ratings perspective, Baa1/Baa3 paper saw the heaviest net client selling with $3.8Bln. See IG credit flow charts on the following page for more information.

 

June 2024  IG Credit Flows by Sector

June 2024  IG Credit Maturity Flows

June 2024 IG Credit by Investment Grade Ratings

The month of June saw a steady pace of new deals and solid secondary trading flows continued with net client selling. U.S. Treasuries saw slightly lower yields along with wider spreads in credit. The U.S. Treasury curve saw 2’s 10’s close inverted by 36 basis points and 2’s 30’s closed inverted by 20 basis points. We closed June and the 1st half of the year with the Fed set to meet again on July 31st, but unlikely we will see a Fed rate cut due to inflation data which is hindering the timing of the next rate cut and the number of potential cuts for 2024. As we begin the month of July, we will get Unemployment data on Friday and upcoming key data reports. We are expecting a light week of activity to begin July as we will break for July 4th and Independence Day, and we will begin blackout periods for earnings as JPMorgan will kick things off on July 12th. The new issue calendar is calling for $80Bln for the month of July and $5Bln for the 1st week of July and the July 4th break. Great job by the AmeriVet Securities team in June as we were a Co-Manager on $550mm 2-part deal for Brighthouse Financial Global, Co-Manager on $1.5Bln 3-part deal for Royalty Pharma, Co-Manager on $2.5Bln 11NC10 for Citigroup Inc, Co-Manager on $600mm 30NC5 for Global Atlantic Fin Co, Co-Manager on $1.2Bln 2-part deal for Enbridge, Co-Manager on $1.5Bln 2-part deal for Mizuho Financial Group Inc, Co[1]Manager on $1.175Bln Verizon Asset Backed deal and Co-Dealer on Tender offer for Warner Bros Discovery Inc. 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.