The credit markets in October saw a lighter new issue calendar that almost reached expectations, pricing $94.5Bln on estimates of $95Bln. This marks the 1st month this year the New Issue calendar has not topped expectations. The U.S. Treasury market saw 2’s—10’s close positively slopped at +12 basis points, while 2’s-30’s closed the month positively sloped +31 basis points.

Spreads were unchanged to 15 basis points tighter and traded in a 5-25 basis point range. October saw heavy secondary trading activity as higher rates had investors selling credit. The markets in October reacted to the post Fed rate cut and the market experienced surging yields in U.S. Treasury’s as they digested the 50-basis point rate cut. The month saw $5.5Bln of Net Client selling continuing the trend of the 1st half of the year that saw heavy net client selling. Not only has the market been trying to deal with rate volatility and a lighter than expected new issue calendar but all the data and the Presidential election has all market participants on edge.

IG Credit spreads in October were unchanged to 15 basis points tighter and spreads traded in a 5-25 basis point range. The US Treasury market saw 2yr notes higher by +55 basis points, 10yr notes higher by +54 basis points and the 30yr closed the month +33 basis points higher driving the move tighter in credit spreads. Looking at U.S. Treasury rates in October, we saw the month begin with 2’s — 10’s positively sloped by +14 basis points and 2’s — 30’s positively slopped at +47 basis points, closing the month with 2’s — 10’s positively slopped at +12 basis points and 2’s — 30’s positively slopped at +31 basis points. At mid-month we saw U.S. Treasury rates making there move higher, and that trend continued into month end as rates reacted negatively to the September 18th Fed rate cut when the 2yr was at 3.56%, 10yr at 3.63% and 30yr at 3.94%. As we look at the markets, the Fed began the rate cut cycle with a 50-basis point rate cut at the September 18th meeting and they will have an opportunity to move again on November 7th, just 2 days following the Presidential election. Will they go 25 or 50 or sit idle, that is the big question. The CDX index opened October ’24 at 54.8 and traded in a tight range before moving lower to the MTD low of 51.4 on 10/16/24 & 10/18/24 and then bounced around into month-end closing at 53.2.

The Bloomberg Barclays U.S. Aggregate Average OAS opened October 24’ at .90 and steadily traded lower into mid-month hitting the MTD low of .79 and then moved slightly higher into month-end and closed at .84 on 10/31/24. The average spread for the month was .83 The Bloomberg Barclays U.S. Aggregate OAS began January 23’ at 1.32. See the charts on following page for more information.

 

 

IG credit flows in October came in at another massive level $796Bln(the highest level so far this year) vs trailing months; 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 $702billion. Spreads were unchanged to 15 basis points tighter in October, as surging U.S. Treasury rates and light new issue calendar pushed credit tighter. October saw $5.5Bln of net client selling as investors continued the selling trend we saw in January, February, March, May, June, July, August, and September. On the credit curve in October net client selling was seen in 12-30yr(6.9Bln), 7-12yr paper($2.1Bln) and 3-7yr($857mm) while 1-3yr and 0-1yr paper saw net client buying.

Health Care, Communications, and Consumer Staples led the charge in net client selling while Energy and Consumer Discretionary saw net client buying. Looking at the markets from a ratings perspective, A1/A3 paper saw the heaviest net client selling while all Investment Grade ratings buckets saw net client selling. See IG Credit Flow charts on the following page.

The month of October nearly met expectations and heavy secondary trading flows continued with net client selling. October’s heavy secondary trading flows were the highest this year as surging U.S. Treasury rates pushed credit tighter.

The month of October saw another month of heavy rate moves, resulting in significantly higher yields. The U.S. Treasury curve saw 2’s 10’s close positively slopped at +12 basis points and 2’s 30’s closed positively slopped by +31Bps. We are now on the eve of the Presidential election, potentially further interest rate volatility and economic uncertainty.

Geopolitical headwinds will remain in the headlines for the rest of the year 2024 with chaos still in the Middle East and the Ukraine. As we begin the month of November, all eyes are on the Presidential Election and we will get upcoming key data reports, and the Fed is set to meet again 2 days after the election.

The new issue calendar is calling for $70Bln for the month of November with just $5Bln anticipated for the first week of November.

Great job by the AmeriVet Securities team in October as we were a Co-Manager on $750mm deal for Ares Mgmt Corp, Co-Manager on $8bln 4-part deal for JPMorgan, Jt-Lead Manger on $3Bln 6NC5 tranche for Morgan Stanley and Co-Manager on $550mm deal for Edison International.

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.