Due to the political issues surrounding Russia and the Ukraine, the yield of the 10-Treasury as measured by the S&P/BGCantor Current 10 Year U.S. Treasury Bond Index tightened by 8 basis points over the course of the last week of February. The index returned 0.39% for the month as the year-to-date is now a 3.94%.
Investors move towards the safety of U.S. Treasury creating additional demand and lower yields will not have an impact on newly issued debt as there are no auctions scheduled for this week. The next round of auctions is scheduled for the week of March 11th as a new 3-year and re-openings in the 10- and 30-year are planned.
The economic calendar contains February MBA Mortgage Applications (-8.5% prior) and ADP Employment (155k expected) along with jobless (336k exp.), manufacturing (5k exp.), factory orders (-0.5% exp.) and finally the Unemployment Rate (6.6% exp.). All of these domestic measurements could take a back seat to the international news if the situation heats up.
The S&P U.S. Issued Investment Grade Corporate Bond Index had a positive week as well returning -.69% for the week as the index closed out the month returning 0.91% and 2.86% year-to-date. These returns now pale in comparison to the high yield index (S&P U.S. Issued High Yield Corporate Bond Index) as the search for yield continues into 2014. The only down day in February for the S&P U.S. Issued High Yield Corporate Bond Index was the 4th. Month-to-date the return of this index is at 1.92% and for the year it is returning 2.70%.
Unlike high yield debt, senior loans as measured by the S&P/LSTA U.S. Leveraged Loan 100 Index sat the sidelines for the month of February. Returning only 0.05% for the month and 0.67% year-to-date, this index seems to be experiencing investor fatigue after consistent returns over a period of years. New issue loan deals are going well and seasoned issuers continue to be able to raise money although yields continued to drift higher.
Source: S&P Dow Jones Indices, Data as of 2/28/2014.