Traders now expect the Fed to raise rates to about 5.4% in July, with only a minor decline by December, futures markets show . In early February, the market envisaged rates rising to a peak under 5.0%, with several rate cuts by year's end. The average yield on U.S. investment grade bonds rose to 5.55% on Monday from just 4.94% on Feb. 1. . "There's much more yield now to be had in corporates," said David del Vecchio, co-head of the U.S. investment grade corporate bond team at PGIM Fixed Income.
February's bonds were oversubscribed by 3.64 times on average, data from Informa Global Markets said.
Investors still had plenty of cash, despite the flurry of issuance, said Blair Shwedo, head of IG corporate bond trading at U.S. Bank.
Analysts expect $160-165 billion of new bond supply in March. "With more volatility, you may see some short term negative returns but overall, we’re well positioned to have a very nice positive total return in investment grade credit in 2023," said Natalie Trevithick, head of investment grade credit strategy at investment management firm Payden & Rygel. (Reporting by Matt Tracy in Washington; editing by Shankar Ramakrishnan and David Gregorio)
