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Highlights from the Week in Corporate Credit:
February 15 – 19, 2021

Global credit outperformed other risk assets as investors grappled with steepening yield curves and commodity price volatility. US Investment Grade Credit spreads tightened by 2-8 bp, with the broad spread index reaching its tightest level in over 12 months while equities were down slightly. Power outages amidst freezing temperatures sent local natural gas prices to extreme levels in Texas, while Treasury yields spiked higher as fiscal stimulus talks progressed. 10y US Treasury yields rose to 13bp to 1.34%, a level last seen in February 2020 which means we’ve effectively unwound all of the March COVID panic rally, which took yields as low as 0.54%.

Canadian credit finished a couple of bps better thanks to a solid round of earnings and rising government yields. Two-thirds of Canadian companies reporting so far have beat street consensus, with sectors such as Utilities, Cyclicals and Industrials all posting strong results. The REIT sector re-repriced 5-20 bp tighter thanks to strong earnings and successful new bond issues. Despite a holiday-shortened week, the primary market was busy printing 1.8bn CAD of bonds across four deals. Cineplex was the latest inaugural issuer in the Canadian credit space with an unrated 5NC2 issue. The beleaguered movie chain issued 250mm at 7.5% with much fanfare and ended 2.5 points higher by the weeks’ end.