August is off to another strong start for new issuance, adding to what has already been one of the busiest years on record across fixed income markets. While jumbo corporate deals have grabbed most of the headlines, securitized markets have been just as active, with ABS and CMBS issuance running 13% and 23% ahead of last year's pace, respectively. The surge in issuance is also reshaping the market. Hyperscalers are emerging as major corporate borrowers, digital infrastructure ABS continues to gain momentum, and the single-asset single-borrower (SASB) market is on track to surpass conduit CMBS in size. Together, these developments are expanding the opportunity set for active managers, particularly in securitized sectors that remain underrepresented in traditional benchmarks. At the same time, they bring new technical and fundamental risks, making rigorous credit analysis and careful security selection more important than ever.
- Investors were encouraged by strong corporate earnings and the prospect of a US-Iran agreement, which together bolstered sentiment across equity and credit markets
- Incoming economic data was mixed, but continued to reinforce the narrative of a resilient US economy
- The number of job openings fell to under 7.4 million, while the ratio of openings to unemployed workers edged up from 1.03 to 1.04
- ISM manufacturing rose to 55.6 in July, the highest reading since 2022, driven in part by continued investment in the AI infrastructure buildout
- Treasury yields partially retraced last month’s sharp selloff, as yields across the curve ended at least 10bps lower month-to-date
- Investors priced lower the likelihood of a September rate cut, with the market-implied probability of a 25bp reduction falling from 72% to 55%
- Thus far, companies have reported earnings growth of over 20% quarter-over-quarter, with an estimated 88% of those companies beating consensus estimates
- Supported by stronger earnings, investment-grade and high-yield corporate spreads tightened by 2bps and 12bps to 76bps and 267bps, respectively
- IG issuers took advantage of the favorable backdrop, issuing almost $80 billion this week, while HY borrowers were more cautious, pricing roughly $3 billion in the primary market
- Agency mortgage-backed securities outperformed Treasuries as interest rate volatility declined; lower-coupon pools benefited more than higher-coupon alternatives as Treasury yields moved lower
- Municipal bonds performed roughly in line with Treasuries as most muni/Treasury ratios moved +/-1% month-to-date
