Global credit markets bounced back strongly from January weakness as positive economic data and optimism regarding a coronavirus vaccine enabled investors to re-price risk assets higher. US credit tightened by 5-10 bp this week while treasury yields reversed course, rising by 7 bp. The US employment report on Friday exceeded expectations; however, profit-taking stemmed any follow-through rally, suggesting traders have lingering concerns over coronavirus heading into the weekend. US corporate bond issuance remains well ahead of last year’s pace and we anticipate another busy week as issuers take advantage of liquid markets and tight spreads ahead of next week’s holiday-shortened session.
Canadian credit markets were strong, but with a more muted reaction, given spreads remain close to year-to-date tights. Investors digested CAD 3 billion of supply, including Allied Properties REIT ($APUCN), which launched its largest issue and longest tenor to date. The 400mm 10y bond was heavily oversubscribed and finished the week 4 bp tighter than launch spread.