The Credit markets in November experienced a robust new issue calendar, driven by both refinancing needs and M&A related activity. On the month we saw lower yields into month end and tighter spreads along with strong investor demand that helped to absorb the supply as deals were oversubscribed consistently for the month. The new issue calendar topped expectations; pricing $96.7Bln on estimates of $70Bln.  The U.S. Treasury market saw 2’s—10’s close positively slopped at +5 basis points, while 2’s-30’s closed the month positively sloped +23 basis points.

Spreads were unchanged to 20 basis points tighter and traded in a 5-25 basis point range with plenty of volatility in the U.S. Treasury market.  November saw solid secondary trading activity that had investors selling credit to buy the new issue calendar.

In November, several hurdles challenged the credit market. First, persistent economic uncertainties, including consistent inflation, and the Fed’s evolving monetary policy which created volatility and raised borrowing costs mid-month. Investors and market participants continue to monitor potential changes to interest rates as the Fed maintains a cautious stance. Additionally, geopolitical tensions in the middle east, Russia and Ukraine and global trade relations have added to heightened risk premiums in the credit markets.

The high levels of existing debt and refinancing needs have also posed challenges to the market as issuers face increased costs for rolling over debt in what has been a high-rate environment for 2024. The month saw $6.7Bln of Net Client selling continuing the trend of the 1^st half of the year that saw heavy net client selling.  Not only has the market been trying to deal with rate volatility and a heavy new issue calendar but all the data and the prospects of new policies from President elect Trump have all market participants waiting and wondering what’s in store for the markets moving forward.

IG Credit spreads in November were unchanged to 20 basis points tighter and spreads traded in a 5-25 basis point range.

The US Treasury market saw 2yr notes lower by -8 basis points, 10yr notes lower by -19 basis points and the 30yr closed the month -21 basis points lower.  Looking at U.S. Treasury rates in November, we saw the month begin with 2’s — 10’s positively sloped by +16 basis points and 2’s — 30’s positively slopped at +36 basis points, closing the month with 2’s — 10’s positively slopped at +5 basis points and 2’s — 30’s positively slopped at +23 basis points.

At mid-month we saw U.S. Treasury rates making their move higher, but that trend reversed into month end as rates rallied, and we saw U.S. Treasuries close lower on the month. As we look at the markets, the Fed lowered rates for the second consecutive time right after the elections and they are set to meet again on December 18^th, the question is will they go 25 or sit idle.

The CDX index opened November ’24 at 53.24 and steadily moved to the MTD low of 47.42 on 11/07/24.  The CDX index then was range bound at the lower levels before closing off the MTD lows and closing at 48.12. (Charts Below)

The Bloomberg Barclays US Agg Avg Oas opened November 24’ at .83 and steadily traded lower hitting the MTD low of .74 on 11/08/24 and then moved slightly higher into month-end and closed at .78 on 11/29/24.  The avg spread for the month was .78 The Bloomberg Barclays US Agg Oas began January 23’ at 1.32   (Charts Below)

IG credit flows in November came in at $647Bln vs trailing months;  October $796Bln, September $780Bln, August $694Bln, July $691Bln, June $592Bln, May $659Bln, April $757Bln, March $700Bln, February $717Bln, and January $742Bln. The trailing 6-month avg volume is $700billion.

Spreads were unchanged to 20 basis points tighter in November, as volatility in U.S. Treasury rates and the recent election saw $6.7Bln of net client selling as investors continued the selling trend we saw in January, February, March, May, June, July, August, September, and October.

On the credit curve in November net client selling was seen in 3-7yr($6.3Bln) and 12-30yr($2.7Bln) while 1-3yr, 0-1yr and 7-12yr paper saw net client buying. Financials, Energy and Health Care led the charge in net client selling while Technology saw net client buying. Looking at the markets from a ratings perspective, Baa1-Baa3 paper saw the heaviest net client selling while all Investment Grade ratings buckets saw net client selling. (See IG Credit Flow charts below)

The month of November topped expectations and solid secondary trading flows continued with heavy net client selling. The month of November saw another month of volatility in rates, resulting in higher yields mid-month and a rally into month end that pushed rates lower.

The U.S. Treasury curve saw 2’s 10’s close positively slopped at +5 basis points and 2’s 30’s closed positively slopped by +23Bps.  As December begins, the credit markets will be navigating a delicate balance between cautious optimism and persistent macroeconomic uncertainties. Investment-grade credit has demonstrated resilience, supported by solid corporate fundamentals, but spread tightening may be limited as investors worry about inflation risks and central bank policy into 2025.

Looking ahead to 2025, the trajectory of the credit markets will likely hinge on the pace of disinflation, the potential for rate cuts, and issuers’ ability to navigate financial conditions. Investors will look to position themselves carefully as they balance risk and reward as the market braces for potential volatility ahead.

We will get upcoming key data reports, and the Fed is set to meet again on December 18th. The new issue calendar is calling for $40Bln for the month of December, with most of the activity expected in the 1^st two weeks; with the Fed set to meet on December 18^th and the break into Christmas and the holidays.

Great job by the AmeriVet Securities team in November as we were a Sr Co-Manager on $800mm deal for Citibank, Co-Manager on $750mm 11NC10 for Bank of NY, Co-Manager on 2.25Bln 3-part deal for State Street Bank and Trust, Co-Manager on $2.5Bln 21NC20 deal for JPMorgan, Co-Manager on $2.5Bln 11NC10 deal for Wells Fargo and Co-Manager on $1.5Bln PerpNC5 for Citigroup. 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.