27 March 2015 US Fixed Income Weekly United States Credit HY Strategy IG Strategy US Credit Strategy Taking Spread-per-Turn to Sector Level Seasonally-strong issuance period is about to take a break, but not retire Credit markets remained relatively stable over the past week, even as the equities and 10yr rates fully reversed their post-FOMC moves. HY spreads tightened 6 bps, with CCCs underperforming, and single-Bs showing a slight edge over the index. IG moved a basis point wider. Volatility remained high in FX, where EUR is now on its fourth round of retracing its very wide post-FOMC range of 1.06 to 1.11. Rates volatility, high to begin with, has jumped even further and now exceeds its recent peak level reached on Oct 15th, the day of a 7-sigma move in 10yr Treasuries. HY flows have stabilized in recent sessions, following wild swings between strong inflows in Feb and outflows in early March. Hidden behind this relative stability are continued outflows from HY open-ended funds (-$1.6bn in the last week), offset by intakes in ETFs. A S10 move higher in WTI oil since early-last week failed to produce a commensurate move tighter in energy spreads (they widened at first and retraced the move later, netting zero change over the full period). Beta between oil and energy spreads has averaged $1 move in WTI = 10bps move in our DBHYSEN index, as measured since last June. We highlighted what looked like tactical richness of 50-75bp in HY energy spreads going into last week, and therefore view absence of spread reaction to higher oil as a closing of that valuation gap. Issuance has been going strong over the past couple of months, setting new YTD record in IG at $340bn, and matching a previous record of $85bn in HY (same as 2013). In interpreting and extrapolating from these numbers, our readers should keep in mind that March happens to be the strongest month of issuance activity from seasonal standpoint in both IG and HY (measured on a pet