Monthly Market Monitor

September 2024

Macro

In a speech at the Jackson Hole Economic Symposium on August 23, Federal Reserve (Fed) Chair Jerome Powell signaled that rate cuts will likely commence at the upcoming Federal Open Market Committee meeting in September.

Chair Powell and other Fed officials emphasized that given the weaker state of the labor market, further cooling is not desired given the recent progress with inflation.

U.S. Treasury yields responded to the dovish messaging by moving lower. Shorter-dated maturities experienced the sharpest declines, ultimately resulting in a steeper yield curve.

Credit

New issuance for August came in over $100 billion. This both exceeded expectations and was generally well received despite volatile conditions in the beginning of August.

Both investment grade and high yield credit spreads were able to quickly rebound from the sudden sell off at the beginning of the month.

As is typical for the month of September, dealers anticipate an active primary market with approximately $125 billion in new supply forecasted.

Structured

Mortgage-backed securities continued to perform well in August, outperforming other investment-grade sectors for both the month and the trailing three months.

Meanwhile, asset-backed security spreads were modestly wider for the second consecutive month, however excess returns were flat for both July and August.

Chart of the Month

U.S. Credit vs. U.S. Corporate High Yield Average Option-adjusted Spread, bps
A quick round-trip for credit spreads

U.S. Credit vs. U.S. Corporate High Yield Average Option-adjusted Spread, bps

Over the first three trading days of August, risk premiums for investment grade and high yield markets surged 16 and 67 basis points (bps), respectively.
Despite the rocky start, investment grade spreads finished the month 1 bp tighter, while high yield spreads compressed by 9 bps.

As of 9/2/2024. Source: Bloomberg L.P.

Market Data

As of 8/30/2024. Source: Bloomberg L.P.

Bloomberg Sector/Index Performance (USD)

As of 8/30/2024. Source: Bloomberg L.P.

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This publication is for informational purposes only. Information contained herein is believed to be accurate, but has not been verified and cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice or a forecast or guarantee of future results. To the extent specific securities are referenced herein, they have been selected on an objective basis to illustrate the views expressed in the commentary. Such references do not include all material information about such securities, including risks, and are not intended to be recommendations to take any action with respect to such securities. The securities identified do not represent all of the securities purchased, sold or recommended and it should not be assumed that any listed securities were or will prove to be profitable. Past performance is no guarantee of future results.

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