By Ronald Weiner, Huntington Fixed Income Trader
September 28, 2011

 
 
Fund Fact Sheets
Prospectus
Summary Prospectuses
Annual Report
Semi-Annual Report
 


   

11/16//11
The New Abnormal
10/28/11
CIO Market Commentary
9/28/11
Fixed Income Commentary
9/6/11
"Recession Coming? Comments by Director of Economics"
8/2011
International Investing
discusses the latest on Europe
7/2011
CIO Market Commentary

 

T-Bills Treasuries Swap Spread Semi - B
 
Price
Yield
   Price
Yield
 Bid Ask Bid Ask

1 month

-0.005 - -0.015
-0.01
 2 Year 99.232 / 99.232
0.258
27.75
31.75
0.532
0.572

3 month

0.018 -0.007
0.013
 3 Year 99.15 / 99.15
0.428
28.00
32.00
0.708
0.748

6 month

0.043 -0.033
0.038
 5 Year 100 / 100
0.995
27.50
31.50
1.273
1.313

1 year

0.107 - 0.097
0.102
 7 Year 99.26 / 99.27
1.525
22.75
26.75
1.755
1.795
        10 Year 100.2 / 100.2
2.051
  
15.75
19.75
  
2.212
2.252
        30 Year 112 / 112
3.127
  
-25.75
-21.70
  
2.878
2.918

Deposits
  
Commercial Paper
  
Fed Funds
  
Spot FX
  
Libor
 
Bid
Ask
  
15 day
0.25
  
Bid
Ask
  
CHF
0.8955 / 0.8957
  
1 month
0.23889
1 month
0.15
0.25
  
30 day
0.25
  
0.08
0.12
  
EUR
1.3624 / 1.3624
  
3 month
0.36856
2 month
0.19
0.29
  
60 day
0.28
  
High
Low
  
CAD
1.0226 / 1.0229
  
6 month
0.54839
3 month
0.23
0.33
  
90 day
0.32
  
0.10
0.10
  
JPY
76.510 / 76.530
  
9 month
0.69489
4 month
0.26
0.36
  
180 day
0.45
  
Last
Close
  
GBP
1.5645 /1.5650
 
1 Year
0.85489
5 month
0.30
0.40
        
0.10
0.10
  
AUD
0.9895 / 0.9897
  
 
6 month
0.38
0.48
                        
9 month
0.55
0.65
                        
1 Year
0.70
0.80
                        

CDs Domestic
Yankee
  
Active Agencies
  
On REPO
BID
ASK
BID
ASK
  
Spreads
Yield
  
ON
0.300
1 month
 0.27 0.25 0.27 0.25  

FHLB 1.375 05/14
16.50
14.50
0.583
  
1W
0.080
2 month
 0.30 0.28 0.30 0.28  
FHLMC 0.375 10/13
20.50
18.50
0.449
  
2W
0.080
3 month
 0.35 0.32 0.35 0.32  
FHLB 5 11/17
16.50
14.50
2.210
  
1M
0.100
6 month
 0.50 0.45 0.50 0.45                
9 month
 0.65 0.55 0.65 0.55                
1 Year
 0.80 0.65 0.80 0.65                

                Bank Rates 30 Y MBS BEY TSY/SP   TED Spread
DISCOUNT 0.75 BROKER
2.00
 GNMA 5.5 110.53 110.56 0.8487 63 / 3Y   Price %Chg
PRIME 3.25 COFI
1.35
 GOLD 5.5 108.19 108.22 2.6740 233 / 3Y   0.351 3.19%
          FNMA 5.5 108.53 108.56 2.5593 221 / 3Y      

 

Treasury Auctions and Results

Tuesday, September 27th, 2011
US Treas to sell $30B in 4-week Bills. 10:00 am When issue bid of 0%. ***A T-bill cannot be issued lower than 0%. Bid side is negative***
US Treas to sell $30B in 2-year notes. 10:00 am When issue bid of .245%.

Wednesday, September 28th, 2011
US Treas to sell $35B in 5-year notes.

Thursday, September 29th, 2011
US Treas to sell $29B in 7-year notes.

The auctions were pretty vanilla last week as most of the stats for all 3 issues were at their 10-week averages. The best auction was the 30-year, which had a bid to cover ratio of 2.85, the highest since last March and .25 higher than its 10-week average. Foreign investors were also active bidding for the 30-year, receiving 39.4% of the allocation, the highest since last April and an increase of 27.2% over last month. The 3-year had a bid to cover ratio of 3.15 (average 3.18) and a indirect bid of 35.7% (average 35.9%). The 10-year was almost directly on top of its averages as well, with a bid to cover ratio of 3.03 compared to an average of 3.13 and an indirect bid of 48.5% compared to 47.1%.
With the market increasingly pricing in the chance of the Fed's "operational twist", it stands to reason why the longer bonds, especially the 30-year, performed well. However, this is a staunch reversal from last month's auctions in which we saw strong bidding on the short-end as a result of the Fed's announcement of keeping rates low until 2013. It is important to note that all 3 auctions set records for lowest yields at issuance last week. The stats are listed below.

3-Year Auction Results
Date Amount Auctioned (B) Bid to Cover Indirect Bidding Primary Dealer High Yield
November 8, 2010 $32 3.26 35.0% 51.1% 0.575%
December 7, 2010 $32 2.91 36.7% 45.4% 0.862%
January 11, 2011 $32 3.06 39.4% 44.5% 1.027%
February 8, 2011 $32 3.01 27.6% 62.3% 1.349%
March 8, 2011 $32 3.22 34.4% 53.3% 1.298%
April 12, 2011 $32 3.25 33.7% 57.4% 1.280%
May 10, 2011 $32 3.29 32.7% 51.9% 1.000%
June 7, 2011 $32 3.28 37.5% 55.2% 0.765%
July 12, 2011 $32 3.22 34.5% 48.9% 0.670%
August 9, 2011 $32 3.29 47.9% 41.0% 0.500%
September 12, 2011 $32 3.15 35.7% 53.7% 0.334%
Average $32.0 3.18 35.9% 51.1% 0.933%

3-Year Note
Amount Auctioned: $32B
Coupon Rate: .25%
Yield Awarded: .334% ***RECORD LOW YIELD AWARDED IN 3-YEAR AUCTION HISTORY***
Bid to Cover Ratio: 3.15 (a decrease of .14 from last's month auction)
Indirect Bidding: 35.7% (a decrease of 12.2% from last month's auction)
Primary Bidding: 53.7% (an increase of 12.7% from last month's auction)

10-Year Auction Results
Date Amount Auctioned (B) Bid to Cover Indirect Bidding Primary Dealer High Yield
November 9, 2010 $24 2.80 56.6% 34.0% 2.636%
December 8, 2010 $21 2.92 44.4% 44.2% 3.340%
January 12, 2011 $21 3.30 28.2% 38.5% 3.388%
February 9, 2011 $24 3.23 71.3% 28.2% 3.665%
March 9, 2011 $21 3.32 53.0% 40.5% 3.499%
April 13, 2011 $21 3.13 42.4% 51.7% 3.494%
May 11, 2011 $24 3.00 47.2% 44.4% 3.210%
June 8, 2011 $21 3.23 50.6% 41.0% 2.967%
July 13, 2011 $21 3.17 41.9% 44.1% 2.918%
August 10, 2011 $24 3.22 35.4% 33.0% 2.140%
September 13, 2011 $21 3.03 48.5% 40.4% 2.000%
Average $22.2 3.13 47.1% 40.0% 3.126%

10-Year Note
Amount Auctioned: $21B
Coupon Rate: 2.125%
Yield Awarded: 2.000% ***RECORD LOW YIELD AWARDED IN 10-YEAR AUCTION HISTORY***
Bid to Cover Ratio: 3.03 (a decrease of .19 from last's month auction)
Indirect Bidding: 48.5% (an increase of 13.165% from last month's auction)
Primary Bidding: 33% (an increase of 7.4% from last month's auction)

30-Year Auction Results
Date Amount Auctioned (B) Bid to Cover Indirect Bidding   High Yield
November 10, 2010 $16 2.31 38.4% 50.8% 4.320%
December 9, 2010 $13 2.74 49.5% 42.4% 4.410%
January 13, 2011 $13 2.67 37.8% 49.9% 4.515%
February 10, 2011 $16 2.51 43.1% 48.9% 4.750%
March 10, 2011 $13 3.02 40.7% 53.0% 4.569%
April 14, 2011 $13 2.83 47.2% 42.0% 4.531%
May 12, 2011 $16 2.43 33.0% 58.2% 4.380%
June 9, 2011 $13 2.63 38.4% 52.3% 4.170%
July 14, 2011 $13 2.8 37.8% 40.3% 4.198%
August 11, 2011 $16 2.08 12.2% 68.3% 3.750%
September 14, 2011 $13 2.85 39.4% 43.3% 3.310%
Average $14.2 2.60 37.8% 50.6% 4.359%

30-Year Note
Amount Auctioned: $13B
Coupon Rate: 3.75%
Yield Awarded: 3.310% ***RECORD LOW YIELD AWARDED IN 30-YEAR AUCTION HISTORY***
Bid to Cover Ratio: 2.85 (an increase of .77 from last's month auction)
Indirect Bidding: 39.4% (an increase of 27.2% from last month's auction)
Primary Bidding: 43.3% (a decrease of 25% from last month's auction)

T-bills

  • There is little change in T-bills from last week.
  • There is still very high demand for the supply and that leads to negative nominal rates.
  • Increased supply can only go so far as even if there was not excess demand we still have a Fed Funds effective rate trading around .09% that will keep rates low as well.
  • When possible please submit orders the day before the needed settle date. This helps us get better execution for our clients.

New Issue Corps

***NO NEW DEALS OF NOTE***

 

Secondary Corp Issues

  • Corporate spreads continue to widen as uncertainty over Europe, Operation Twist, and growth estimates continue to weigh on the market.
  • There is a general "de-risking", which has resulting in selling finance and bank names (who's spreads have increase the most) and buying Treasuries. While treasury yields decrease, the amount that spreads are increasing actually results in a higher overall yield for secondary corporate paper.
  • With these low rates, corporate finance departments have been issuing debt. These new issue bonds are closer to par but have significantly lower income and pose higher interest rate risk than those secondary pieces trading at a premium.
  • There is still a serious lack of supply in years 2018 and 2019 outside finance names and secondary pieces trading above $115.
  • Supply for fixed to float corporates is small but we are seeing some issuance. These names are typically finance or insurance companies and a lot of them are reverse order bonds1 meaning that it can have a variable deal sizes. We are focusing on bonds that reset to CPI YOY over resetting to libor. With current Fed mandates if the bonds resets to libor next year you could see significant interest rate risk.
 

1 A reverse order bond is a new issue in which there is no set deal size at the announcement of the offer. The deal size is therefore variable as if the underwriter gets $50,000,000 in orders that is the deal, however if they only get $1,000,000 in orders, that is the deal size. Reverse order bonds pose a risk to liquidity as the smaller the deal size the less liquid the bond.

                   A Rated Industrials
Maturity 9/27/2011 09/19/20011 Change vs. Utilities vs. Finance
1 year 77 78 (1) (22) (33)
2 year 81 81 0 (47) (73)
3 year 87 87 0 (44) (70)
5 year 111 111 0 (9) (56)
7 year 135 122 13 20 (54)
10 year 145 135 10 (10) (43)
                   A Rated Utilities
Maturity 9/27/2011 09/19/20011 Change vs. Industrials vs. Finance
1 year 99 98 1 22 (11)
2 year 128 128 0 47 (26)
3 year 131 130 1 44 (26)
5 year 120 118 2 9 (47)
7 year 115 112 3 (20) (74)
10 year 155 149 6 10 (33)
                   A Rated Finance
Maturity 9/27/2011 09/19/20011 Change vs. Industrials vs. Utilities
1 year 110 105 5 33 11
2 year 154 147 7 73 26
3 year 157 151 6 70 26
5 year 167 161 6 56 47
7 year 189 176 13 54 74
10 year 188 172 16 43 33
                   BBB Rated Industrials
Maturity 9/27/2011 09/19/20011 Change vs. Utilities vs. Finance
1 year 155 157 (2) 38 (111)
2 year 169 170 (1) 24 (111)
3 year 196 197 (1) 46 (127)
5 year 210 210 0 55 (102)
7 year 215 216 (1) 52 (121)
10 year 226 211 15 56 (93)
                   BBB Rated Utilities
Maturity 9/27/2011 09/19/20011 Change vs. Industrials vs. Finance
1 year 117 128 (11) (38) (149)
2 year 145 156 (11) (24) (135)
3 year 150 162 (12) (46) (173)
5 year 155 161 (6) (55) (157)
7 year 163 168 (5) (52) (173)
10 year 170 170 0 (56) (149)
                   BBB Rated Finance
Maturity 9/27/2011 09/19/20011 Change vs. Industrials vs. Utilities
1 year 266 254 12 111 149
2 year 280 267 13 111 135
3 year 323 314 9 127 173
5 year 312 292 20 102 157
7 year 336 304 32 121 173
10 year 319 287 32 93 149

9/28//2011                                       Corporate Yields Comparison by Sector                     7/5/2011
Term   A Industrial A Utility A Corporate   A Industrial A Utility A Corporate
1 Year 0.87% 1.09% 1.20% 0.86% 1.06% 1.13%
2 Year 1.05% 1.52% 1.78% 0.97% 1.44% 1.63%
3 Year 1.28% 1.72% 1.98% 1.16% 1.59% 1.80%
5 Year 2.06% 2.15% 2.62% 1.95% 2.02% 2.45%
7 Year 2.82% 2.62% 3.36% 2.61% 2.51% 3.15%
10 Year 3.44% 3.54% 3.87% 3.31% 3.45% 3.68%
9/28/2011 Corporate Yields Comparison by Sector
7/5/2011
Term   BBB Industrial BBB Utility BBB Corporate % Change % Change % Change
1 Year 1.65% 1.27% 2.76% 1.65% 1.36% 2.62%
2 Year 1.93% 1.69% 3.04% 1.86% 1.72% 2.83%
3 Year 2.37% 1.91% 3.64% 2.26% 1.91% 3.43%
5 Year 3.05% 2.50% 4.07% 2.94% 2.45% 3.76%
7 Year 3.62% 3.10% 4.83% 3.55% 3.07% 4.43%
10 Year 4.25% 3.69% 5.18% 4.07% 3.66% 4.83%

***Note that in this chart below, a negative number in the "rich/cheap" field means it is a good value.***

Issuer Name Coupon Maturity Price YTM Nominal Spread Mod Dur Rich/ Cheap S&P Mdys
CATERPILLAR FINL SVCS MTNS B 1.900 12/17/2012 101.444 0.722 52 1.215 16 A A2
OCCIDENTAL PETE CORP DEL 1.450 12/13/2013 101.270 0.872 56 2.177 25 A A2
GENERAL ELEC CAP CORP MTN BE 2.100 01/07/2014 100.063 2.071 176 2.215 -12 AA+ Aa2
WAL MART STORES INC 1.625 04/15/2014 102.303 0.716 35 2.494 17 AA Aa2
WAL MART STORES INC 3.200 05/15/2014 105.974 0.908 53 2.522 -2 AA Aa2
DANAHER CORP DEL 1.300 06/23/2014 101.048 0.913 52 2.690 36 A+ A2
MEDTRONIC INC 3.000 03/15/2015 106.253 1.160 60 3.313 33 AA- A1
ABBOTT LABS 2.700 05/27/2015 104.886 1.334 73 3.479 21 AA A1
HEWLETT PACKARD CO 2.125 09/13/2015 99.232 2.328 165 3.783 -65 A A2
MICROSOFT CORP 1.625 09/25/2015 102.325 1.031 35 3.846 12 AAA Aaa
PROCTER & GAMBLE CO 1.800 11/15/2015 102.292 1.231 51 3.965 13 AA- Aa3
JPMORGAN CHASE & CO 2.600 01/15/2016 98.838 2.888 213 4.027 -1 A+ Aa3
MEDTRONIC INC 2.625 03/15/2016 104.183 1.652 85 4.222 17 AA- A1
WAL MART STORES INC 2.800 04/15/2016 106.060 1.423 60 4.244 3 AA Aa2
LOWES COS INC 2.125 04/15/2016 101.856 1.700 88 4.297 16 A A1
BB&T CORPORATION 3.950 04/29/2016 105.493 2.673 185 4.145 108 A A2
APPLIED MATLS INC 2.650 06/15/2016 101.557 2.300 144 4.394 -41 A- A3
DANAHER CORP DEL 2.300 06/23/2016 102.907 1.661 80 4.469 26 A+ A2
JPMORGAN CHASE & CO 3.150 07/05/2016 99.737 3.209 235 4.376 -14 A+ Aa3
CAMPBELL SOUP CO 3.050 07/15/2017 105.724 2.001 88 5.303 24 A A2
DEERE JOHN CAP CORP MTNS BE 2.800 09/18/2017 102.499 2.350 118 5.493 0 A A2
WAL MART STORES INC 4.125 02/01/2019 112.852 2.221 75 6.381 9 AA Aa2
MORGAN STANLEY 5.625 09/23/2019 95.163 6.407 480 6.305 -167 A A2
DEERE & CO 4.375 10/16/2019 113.923 2.461 84 6.773 28 A A2
ABBOTT LABS 4.125 05/27/2020 110.956 2.700 97 7.276 17 AA A1
TARGET CORP 3.875 07/15/2020 108.588 2.769 100 7.457 16 A+ A2
GENERAL ELEC CAP CORP MTN BE 4.375 09/16/2020 100.641 4.288 249 7.364 26 AA+ Aa2
PEPSICO INC 3.125 11/01/2020 102.932 2.758 94 7.812 5 A- Aa3
HEWLETT PACKARD CO 3.750 12/01/2020 97.731 4.048 222 7.594 -107 A A2
KELLOGG CO 4.000 12/15/2020 108.179 2.979 113 7.681 3 BBB+ A3
GENERAL ELEC CAP CORP MTN BE 4.625 01/07/2021 103.480 4.169 232 7.463 42 AA+ Aa2
MERCK & CO INC NEW 3.875 01/15/2021 108.931 2.779 92 7.815 25 AA A1
MEDTRONIC INC 4.125 03/15/2021 110.615 2.840 94 7.912 21 AA- A1
CAMPBELL SOUP CO 4.250 04/15/2021 110.239 3.009 110 7.788 1 A A2
LOWES COS INC 3.750 04/15/2021 104.593 3.189 128 7.909 -15 A A1
WAL MART STORES INC 4.250 04/15/2021 112.358 2.770 86 7.827 3 AA Aa2
U S BANCORP MTNS BK ENT 4.125 05/24/2021 107.559 3.209 129 7.912 156 A+ Aa3
APPLIED MATLS INC 4.300 06/15/2021 103.547 3.858 191 7.840 -82 A- A3
DANAHER CORP DEL 3.900 06/23/2021 108.604 2.881 96 8.091 21 A+ A2
3.217 6.336 104.534 2.418 121 5.477 7 A+ A1

 

Agencies

  • With the Treasury rally we are seeing a lot of callable agency bonds called back to the GSE's.
  • This means that GSE's will call more seasoned bonds and issue new bonds with lower coupons, which especially on the long-end will mean that it will increase the amount of interest rate risk with the new issues.
  • We are focusing on 1x calls and quarterly calls when they offer a significant coupon pick-up to 1x's. American calls are very rich right now as the company that issues these the most is Federal Farm Credit. Since FFCB is the lowest issuer investors are willing to buy a FFCB name with an continuous call at no additional coupon or yield to 1x's because they want the FFCB for diversification.
  • With the amount of bonds being called, the new issue market should be busy in the next couple of weeks. Many times when the GSE's are calling bonds and reissuing at lower coupons the settle dates might not be as long as they have in recent in months. However, the amount of time between the announcement date and the settle date depends on the immediate funding needs of the GSE's.
  • US Treas Rates vs. US Agency Bullet Rates
    Term US Treas US Agency Spread
    3 Months 0.0102% 0.0395% 0.0293%
    6 Months 0.0305% 0.0954% 0.0649%
    1 Year 0.1017% 0.1973% 0.0956%
    2 Years 0.2432% 0.4178% 0.1746%
    3 Years 0.4146% 0.6670% 0.2524%
    5 Years 0.9544% 1.2641% 0.3097%
    7 Years 1.4690% 1.7323% 0.2633%
    10 Years 1.9919% 1.8369% -0.1550%

 


 

Ronnie Weiner, MFE
Assistant Vice President, PFG - Columbus - Portfolio Management
Senior Trader
The Huntington National Bank
41 South High Street, (HC0520) , Columbus, OH 43287
Phone: 614/480-4669   Fax: 614-480-5467  
Email: ronald.weiner@huntington.com
http://www.huntington.com


NOT A DEPOSIT * NOT INSURED BY ANY GOVERNMENT AGENCY * NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE