MARKET NEWS
- Markets remained resilient in March despite heightened rate and spread volatility stemming from the ongoing conflict between the US-Israel and Iran
- Shipping disruptions in the Strait of Hormuz sparked sharp moves in energy markets and introduced concerns about heightened inflation
- West Texas (WTI) crude and Brent oil rose over 51% and 62%, respectively, while TTF natural gas increased by 57%
- The Federal Reserve (Fed) kept the fed funds target range unchanged at 3.50% - 3.75%, citing elevated inflation and recent labor market developments as downside risks; geopolitical uncertainty also influenced their decision
- The updated dot plot shows just one expected cut in 2026; however, renewed energy-driven inflation fears ignited speculation about a potential rate hike
- CPI grew 2.4% year-over-year in February, which was in line with expectations; January’s Core PCE rose to 3.1% year-over-year, which was above forecasts of 3.0%
- February non-farm payrolls decreased by 92k, below estimates, while the unemployment rate increased to 4.4%
- Treasury rate volatility continued in March, driven by oil-related inflation concerns and heavy corporate issuance, as the spread between the 2- and 30-year rates tightened 12bps to 111bps
- Investment-grade (IG) issuance totaled $237 billion – exceeding dealer forecasts to become the second busiest March on record
- Investment-grade (IG) corporates posted the biggest monthly loss in March since October 2024, as IG spreads widened 5bps to 89bps; Energy and Insurance were two of the best performing sectors, while Banking lagged other corporate sub-sectors
- High-yield (HY) corporate spreads widened to 335bps intra-month, then retraced on hopes that the conflict with Iran is nearing an end; spreads closed the month at 317bps, 26bps wider month-over-month
- Lower-quality issuers outperformed higher-quality issuers, with CCCs outperforming BBs by 18bps
- HY supply totaled $21 billion in March, led by two large acquisition financing deals, which accounted for half of the month’s issuance
- Agency mortgage-backed securities (MBS) underperformed other securitized sectors, pressured by rate volatility and rising mortgage rates; MBS spreads widened 3bps to 24bps
- Municipal bonds underperformed Treasuries as muni/Treasury ratios rose across the curve
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