The credit markets in March topped expectations, pricing $142.2Bln on projections of $130Bln. YTD, we have seen the new issue calendar topping expectations for 3 straight months creating the busiest first quarter on record with $529Bln of new deals topping the previous high of $479Bln in 2020 by 10%. The fast-paced start to the new year in Investment Grade Credit was driven by Issuer’s desire to strengthen their balance sheets ahead of a potential market correction or macro events as the Fed weighs the timing of rate cuts. The U.S. Treasury market saw 2’s—10’s close inverted by 39 basis points, while 2’s30’s closed inverted by 25 basis points. Spreads were 2 to 25 basis points tighter and traded in a 10-30 basis point range. March saw heavy secondary trading activity as the strong new issue calendar had investors continuing to sell secondary paper to fund the new issue calendar, for the third straight month.

The Fed began the year super-charging risk assets and pushing spreads tighter and yields lower however at the March 20 meeting, they signaled just three rate cuts for the year and walked back comments that have shifted the start date for rate cuts. The month saw $1.3Bln of net client selling and we have now seen just shy of $20Bln in net client selling for the year. As we began the month, we saw solid net client buying until 3/18/24 in front of the Fed meeting on March 20th but as the month continued, we saw a reversal and heavy net client selling to close the month as the Fed signaled three rate cuts and uncertainty on timing of the cuts. We saw U.S. Treasuries rise mid-month and then lower into month end. The rally in spreads continues to be a welcome sign for issuers as it has created a solid backdrop for new deals and lower borrowing costs to begin the year.

IG Credit spreads in March were 2 to 25 basis points tighter and spreads traded in a 10-30 basis point range. The US Treasury market saw 2yr notes higher by +5 basis points, 10yr notes higher by +1 basis points and the 30yr closed the month +1 basis points higher. Looking at U.S. Treasury rates in March we saw the month begin with 2’s — 10’s inverted by 35 basis points and 2’s — 30’s inverted by 21 basis points, closing the month with 2’s — 10’s inverted by 39 basis points and 2’s — 30’s inverted by 25 basis points. As we look at the markets, the Fed held rates steady at the March 20th meeting and signaled 3 rate cuts for 2024 but pushed the timing of cuts back due to continued sticky inflation data. The CDX index opened March ’24 at 51.71 and briefly ticked higher to 51.97 before moving lower midmonth as spreads moved tighter with the CDX Index hitting 48.34 on 3/13/24, 48.36 3/19/24 before steadily trading higher to 53.54 on 3/25/24 before closing the month at 51.64 on 3/28/24. (Charts Below) The Bloomberg Barclays US Aggregate Average OAS opened March 24’ at .97 the MTD high and steadily traded lower to .88 on 3/21/24 & 3/22/24 before moving higher to close the month at .90 on 3/28/24. The avg spread for the month was +92. The Bloomberg Barclays US Aggregate OAS began January 23’ at 1.32.

 

U.S. Treasury Moves
01/31/23 to 03/28/24

 

CDX Investment Grade Index
March 2024

 

CDX Investment Grade Index
March 2024

 

Bloomberg US Aggregate Corporate Average OAS
01/01/21–3/29/24

 

Bloomberg Barclays US Aggregate Corporate Average OAS
01/01/02–3/29/24

 

IG credit flows in March came in at $700Bln vs trailing months, February $717Bln, January $742Bln, 5 December $541, November $632Bln, October $594Bln, September $522Bln, August $551Bln, July $517Bln, June $577Bln, May $619Bln, April $505Bln, March $683Bln, February $617Bln, January $620Bln. The trailing six-month average volume is $654Bln.

Spreads were 2 to 25 basis points tighter in March, as the heavy new issue calendar saw credit tighter. March saw just $1.3Bln of net client selling as investors slowed the pace of selling secondary paper following a heavy dose of selling in January and February. We saw a reversal from the beginning of the month in secondary paper as the first 18 days saw heavy net client buying of $5Bln, but post Fed that sentiment changed, and we saw net client selling through month end and quarter end. YTD we seen a total of $19.9Bln of net client selling as a torrid pace on new deals along with tighter spreads and the Fed slowing down timing of rate cuts has led to heavy net client selling from investors. On the credit curve for the month, 12yr and longer maturities led the selling with $2.6Bln, while 7-12yr and 3-7yr paper saw $1.1Bln & $1Bln of net client selling, respectively.

Net client buying was seen by 0-1yr paper with $3.5Bln. Financials, Communications and Energy led the charge in net client selling with Industrials, Health Care and Consumer Staples seeing light net client buying. Looking at the markets from a ratings perspective, Baa1/Baa3 paper saw the heaviest net client selling with $3.4Bln and Aaa saw $234mm. Net client buying was seen in Aa1/Aa3 with $1Bln along with A1/A3 seeing $1.3Bln.

IG Credit Flows by Sector
March 2024

 

IG Credit Maturity Flows
March 2024

 

IG Credit by Investment Grade Ratings
March 2024

 

YTD 2024 IG Credit Flows by Sector
March 2024

 

The month of March saw a steady pace of new deals and solid secondary trading flows continued but we saw lighter net client selling. U.S. Treasuries saw slightly higher yields along with tighter spreads in credit. The U.S. Treasury curve saw 2’s 10’s close inverted by 39 basis points and 2’s 30’s closed inverted by 25 basis points. We closed the month with the Fed signaling three rate cuts for the year and pushed back the timing of cuts based on inflation data. As we begin the month of April, we will get Unemployment data on Friday, upcoming key CPI and PPI reports, first quarter earnings beginning April 12 and the next Fed meeting is not until May 1. We continue to see risk premiums on U. S. investment grade credit narrowing and that has led to some of the tightest levels on credit in over 2 years. The new issue calendar is calling for $100Bln for the month of April and this week $20Bln of new supply is expected.

Great job by the AmeriVet Securities team in March, as we were a Co-Manager on $750mm 30yr for Barclays PLC, Co-Manager on $2.5Bln 6.875% Perp for JPMorgan, Co-Manager on $2.5Bln 2-part deal for Ford Motor Credit, Co-Manager on $2Bln 2-part deal for Bank of New York, Co-Manager on $3Bln 2-part deal for Goldman Sachs Bank USA, Co-Manager on $500mm 10yr for Narragansett Electric and CoManager on $959mm Santander Prime Auto ABS deal.

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.