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2026-02-17 20:57:49
[Swap Market Under Mild Pressure, Investment-Grade Corporate Bond Issuance Boom May Be the Next Catalyst] ⑴ On Tuesday, the dollar swap market saw mild buying, continuing Friday's trading pattern, with slightly increased volatility. Traders are preparing for potentially higher-than-expected investment-grade corporate bond issuances, making the swap market lean towards payer sentiment. Except for a slight narrowing of the 2-year spread due to the flattening yield curve, swap spreads across all maturities generally widened. ⑵ Last week, total investment-grade corporate bond issuance reached $40 billion, but some issuers chose to wait and see due to risks such as Treasury refunding supply and employment and inflation. With Treasury yields falling from their December lows, coupled with strong corporate bond demand this year, more borrowers may seize the opportunity. The market expects investment-grade supply to be between $30 billion and $40 billion this week. ⑶ Regarding interest rates, SOFR futures showed mixed movements, with the overall curve flattening as money market rates rose. US Treasury yields fell, following European and British bond yields, and the yield curve flattened slightly, as markets focused on factors such as weak German GDP, an unexpected decline in ZEW yields, and a surge in UK unemployment to a new high outside of the pandemic. The 10-year US Treasury yield briefly fell below 4.02%, hitting a new low for this cycle, but subsequently recovered due to profit-taking. (4) On the macro level, the market awaits this week's Fed meeting minutes, US GDP, and PCE data. Meanwhile, geopolitical factors continue to weigh on sentiment: the US-Iran Geneva talks and concerns about the disruptive potential of AI kept investors cautious, causing the dollar index to rise 0.31% to 97.222, while gold prices fell 1.5%.
