Executive Summary
- Treasury Markets: The Treasury curve bear flattened as the 2Y rose 12 bp to 4.95% while the 10Y rose just 5 bp to 4.47%, extending the curve inversion by 8 bp to 48 bp inverted. Treasury auctions for the upcoming week ahead will be highly anticipated ahead of the latest PCE data, as 2Y, 5Y, and 7Y notes will be released between Tuesday and Wednesday of this week.
- Credit Markets: US IG spreads remained unchanged on the week at 89 bp, while yields rose 6 bp to 5.55%, resulting in nominal excess returns of +0.01% and total return losses of -0.17%. US HY widened 2 bp to 311 bp while yields rose 10 bp to 7.96%, driving weekly excess and total return losses of -0.02% and -0.20%.
- Municipal Markets: Muni yields were broadly higher last week, but it was the belly of the curve that saw the sharpest movement as the BVAL triple-A benchmark increased by 31 bp in 5-years and 34 bp in 10-years while the 1-year yield rose by 9 bp and in 30-years it rose by just 3 bp. This week’s new issue calendar totals $7.7 bn, of which $677 mn is taxable. The forward calendar is building but should also benefit from demand fueled by the heavy redemption flows in the month of June.
- Equity Markets: Equity market performance was mixed as the tech heavy Nasdaq (+1.4%) outperformed as a result from stellar earnings from NVIDIA, this was followed by the S&P 500 that ended the week flat (0.0%). Small caps Russell 2000 and the DJIA underperformed with weekly total return losses of -1.2% and -2.3%, respectively. Volatility remained relatively flat despite a mid-week spike to 13.37, before closing Friday at 11.92, down just 0.6% WoW.
- Commodity Markets: Oil prices continued to grind lower with WTI ending Friday at $77.80/bbl, down 2.8%; even so, persistent geopolitical tensions, the looming OPEC+ meeting and the start of the US summer driving season are keeping prices elevated relative to beginning of year levels. Base and precious metals start to retreat after a torrid May, as the ‘higher for longer’ Fed rates continue to exert pressure.
- Fund Flows: Total fixed income ETF net flows were negative for the first time in five weeks as UST, muni and IG corporate ETFs all lost assets while HY ETFs had a fifth consecutive week of net inflows.
Relative Value
Treasury Markets:
Credit Markets:
Municipal Markets:
- For additional details on municipal bond market tax-exempt and taxable yields and spreads see Muni Catch Up: Punched in the Belly.
Equity Markets:
Commodity Markets:
Oil prices continued to edge lower with WTI ending Friday at $77.68/bbl, down 3%, amid the outlook for higher interest rate in face of inflation, despite the upcoming OPEC+ meeting and the start of the US summer driving season.
Fund Flows:
Money Market Fund Flows
Long-Term Mutual Fund & ETF Flows for the Week Ended Wednesday, May 22
ETF Activity for the Calendar Week Ended on Friday, May 24
Our archive of fixed income ETF reports is available on the ETF Home Page.
For more about how we compile mutual fund and ETF flows please see Spotlight on Fund Flow Reporting – An Update.
Winnie Cisar, CFA
Global Head of Strategy
CreditSights
Zachary Griffiths, CFA
Head of IG & Macro Strategy
CreditSights
Eric Axon, CFA
Co-Head of High Yield, Head of Healthcare
CreditSights
Charles Johnston, CFA
Head of Energy
CreditSights
Wen Li, CFA
Global Head of Strategy
CreditSights
Pat Luby
Head of Municipal Strategy
CreditSights
Logan Miller
Head of European Strategy
CreditSights
Brian Perez
Analyst, Credit Strategy
CreditSights
Kathleen Tang
Analyst, Strategy
CreditSights
