Sonali Theisen, Head of FICC E-Trading & Market Structure

October 5, 2020

SEC FIMSAC: 2020 Corporate Credit Market Observations
2

$11

$14

$20

$8

$15

$10 $8

$0

$4

$0 $0 $0

$3 $2

$15

$13

$4

$10$12$10

$15

$12$12

$23

$9

$5

$7 $6 $7 $7

$20

$23

$10

$1 $3

$17$18

$7

1/10 1/17 1/24 1/31 2/7 2/14 2/21 2/28 3/6 3/13 3/20 3/27 4/3 4/10 4/17 4/24 5/1 5/8 5/15 5/22 5/29 6/5 6/12 6/19 6/26 7/3 7/10 7/17 7/24 7/31 8/7 8/14 8/21 8/28 9/4 9/11 9/18 9/25

$72

$44$29$15$24$37$39

$0

$32

$9

$61

$104

$120

$43

$60

$42

$91$101

$70

$53$42$52

$31

$62

$28$18$24$15 $8

$27$42$52$39

$19 $6

$70

$44$37

1/10 1/17 1/24 1/31 2/7 2/14 2/21 2/28 3/6 3/13 3/20 3/27 4/3 4/10 4/17 4/24 5/1 5/8 5/15 5/22 5/29 6/5 6/12 6/19 6/26 7/3 7/10 7/17 7/24 7/31 8/7 8/14 8/21 8/28 9/4 9/11 9/18 9/25

Source: Dealogic as of Sept 25

Total 

GCM 

Vol. 

Jan: $229B Feb: $161B Mar: $270B Apr: $368B May: $394B

0 1 2 3 2 0 2 0 0 0 1

5 3 4 2 4 1

4

7 7 7 6 4 3 1 4

13

5 3 2 5

4 4

3

2

0 0 0

3 4 6

21

12 12 9

8 7

24

3

4

2

1 1

6 7

5

1 2

6

5

3 4

0

1 1

3 3

3

0 0 0

2 3

3 4

5

9

6

4

6

7

1

6

0

1

1

1 0

0

5

5

1 0

1

4

1

$7

$1

$5 $5 $7 $7 $6 $5 $7

$1 $0 $0 $3 $2 $5 $7 $9 $12

$31

$20

$16

$20$17

$11

$32

$8 $5 $6 $9 $8

$13

$17$14

$6 $4

$11

$22

$10

1/10 1/17 1/24 1/31 2/7 2/14 2/21 2/28 3/6 3/13 3/20 3/27 4/3 4/10 4/17 4/24 5/1 5/8 5/15 5/22 5/29 6/5 6/12 6/19 6/26 7/3 7/10 7/17 7/24 7/31 8/7 8/14 8/21 8/28 9/4 9/11 9/18 9/25

IPO FO CVT

IG Bonds

HY Bonds

ECM

‘20 Avg.

($44B)

‘19 Avg.

($25B)

‘20 Avg.

($10B)

‘19 Avg.

($6B)

‘20 Avg.

($10B)

‘19 Avg.

($5B)

US capital markets weekly issuance volume

Jun: $336B Jul: $135B Aug: $257B Sept: $245B

Following a pause at pandemic onset, Mar-May 2020 saw record-setting issuance
3

New issue closed deal characteristics & corporate yields, US IG

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

200620072008200920102011201220132014201520162017201820192020

4.707%

1.943%

8.989%

3.2x

4.3x

6.8x

2019 2020 YTD Week ended July 17

ICE BofA U.S. Corporate Index Yield-to-Worst (%)

Order Book Oversubscription (x)

19 bps

32 bps 34 bps

2019 2020 YTD Week ended July 17

Spread Improvement from Initial Guidance (bps)

Source: Bank of America Securities

Investors adding risk post-stimulus drove favorable issuer pricing dynamics & all-in low yields 
4

Commercial paper outstanding, US corporates

Source: Federal Reserve

274 mm

0

50

100

150

200

250

300

350

400

$ mm

Weekly Corporate CP outstanding

Weekly Period Average

SMCCF announced

Corporate CP outstanding -39% from YTD highs, as issuers have refinanced out the curve
5

TRACE volumes, US IG & HY

Source: FINRA TRACE

Significant trading volume increases Mar-May 2020, supported by new issue calendar

24.2 bn

0.0

10.0

20.0

30.0

40.0

$ bn

Daily average notional, US IG 

Issues >30 Days New Issues Period Avg (All Issues)

13.4 bn

0.0

10.0

20.0

30.0

40.0

$ bn

Daily average notional, US HY 

Issues >30 Days New Issues Period Avg (All Issues)
6

TRACE ticket counts, US IG & HY

Source: FINRA TRACE

The most significant uptick YoY Mar-May occurred in 100k-5mm IG and 1mm+ HY tickets

0.0

10.0

20.0

30.0

40.0

Tickets ($ k)

Daily average ticket count, US IG

<$100k $100k-$5mm >$5mm

0.0

5.0

10.0

15.0

Tickets ($ k)

Daily average ticket count, US HY

<$100k $100k-$1mm >$1mm
7

Quoted bid-offer and absolute spread/price movement, US IG & HY

Source: iBoxx (LHS), Bank of America Securities (RHS)

0

5

10

15

20

LQD ETF constituents: avg quoted b/o

bps

0

0.4

0.8

1.2

1.6

HYG ETF constituents: avg quoted b/o

price points

0

5

10

15

20

25

0

100

200

300

400

2/213/134/034/245/156/056/267/178/078/289/18

IG 10Y b/o spread; bps (RHS)

IG 10Y spread; bps (LHS)

0

0.2

0.4

0.6

0.8

60

70

80

90

100

2/213/13

4/3

4/245/15

6/5

6/267/17

8/7

8/289/18

HY 5Y b/o spread; price points (RHS)

HY 5Y avg closing price (LHS)

SMCCF announced

Quoted bid-offer in Mar 2020 widened ~4.8x from pre-pandemic levels, now ~1.7x
8

Dispersion, US Corporates BBB-A & BB-BBB spreads

Source: ICE Data Indices, BofA Research: ‘US IG Credit Strategy Outlook: Fast and Furious 20’

0

50

100

150

200

50 150 250 350 450

BBB spread (bps)

BBB-A spread (bps)

Mar 23, 2020

Mar 6, 2020

Sep 18, 2020

50

100

150

200

250

300

350

400

50 150 250 350 450

BBB spread (bps)

BB-BBB spread (bps)

Mar 23, 2020

Mar 6, 2020

Sep 18, 2020

At the height of liquidity concerns, higher rated bonds underperformed 

as investors sold short-dated high quality paper
9

Purchased as of 8/31/20 ($bn)

IG ETFs 7.5

IG Bonds 3.6

HY ETFs 1.1

HY Bonds 0.2

TOTAL 12.5

SMCCF Timeline:

• 3/22: Program announced. $225-

250Bn facility

• 5/12: Credit ETF purchases begin

• 6/16: Cash bond purchases begin

• 7/23: Credit ETF buying halted, 

just cash bond purchases 

(~$20mm/day since 7/23)

Fed SMCCF purchase pace, US corporate bonds & ETFs

Source: Federal Reserve

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

12-May19-May26-May

2-Jun9-Jun

16-Jun23-Jun30-Jun

7-Jul

14-Jul21-Jul28-Jul

4-Aug

11-Aug18-Aug25-Aug

$ mm

Daily bond (par value) and ETF (market value) purchases

Cash Bonds IG ETFs HY ETFs

SMCCF announcement helped stabilize markets; ETF purchases had an impact across the curve
10

GSIB VAR & Standard Market Risk RWA

Source: SNL Financial. GSIBs include Bank of America, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley

Market volatility drove recalibration of VAR; significant increases to RWA consumption

1

824 

994 923 839 830 769 

1,247 

2,784 

9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020

428,544 410,350 400,454 382,496 368,625 353,975 

437,978 

498,966 

9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020

Standard Market Risk RWA ($mm)

VAR ($mm)
11

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