The spread difference between Ally Financial 1.95% 2023 (ALLY 23's, BBB-) and General Motors Financial Company 3.65% 2022 (GM 22's, BBB-) has been inverted. ALLY 23's have historically traded under GM 22's, but currently trade 23bps wider (2 standard deviations). Holders of GM 22's have the opportunity to take profits at 34bps and switch into ALLY 23's at 57bps.

Sharp tightening in WFC 35's makes them look expensive vs peers. We highlight the dislocation in spread difference between BAC 31's and WFC 35's, which has increased from -24bps to +5bps. Holders of WFC 35's have the opportunity to take profits at 89bps and switch into BAC 31's at 94bps.

The sharp tightening in ONE Gas 4.658% 2044 (OGS 44's, A) makes them look expensive against other utilities. Katana identifies a significant dislocation against AEP Transmission Company 3.65% 2050 (AEP 50's, A). AEP 50's have historically traded through OGS 44's by between 20 and 60bps. Due to the sudden move in OGS 44's, they now trade at the same spread. Holders of OGS 44's have the opportunity to take profits at 125bps and switch into AEP 50's at 126bps, with a potential reversion of 34bps were the spread difference to return to the historical mean.

The spread difference between BROADCOM 4.25% 2026 (AVGO 26's, BBB-) and Hewlett Packard 4.9% 2025 (HPE 25's, BBB) is at its highest as HPE 25's have been tightening faster than AVGO 26's since early December. The exponentially weighted mean of the difference has increased from 10bps to 24bps and currently AVGO 26's are trading 29bps wider. Holders of HPE 25's have the opportunity to take profits at 68bps and switch into AVGO 26's at 97bps.

Truist Financial Corporation 1.95% 2030 (TFC 30's, A-) have historically traded more than 20bps under JPMorgan Chase 3.625% 2027 (JPM 27's, A-). The spread difference has inverted and TFC 30's currently trade 5 bps wider (2.8 standard deviations). Holders of JPM 27's have the opportunity to take profits on the sharp tightening at 60bps and switch into the TFC 30's at 65bps, with a potential reversion of 32bps were the spread difference to return to the average.

The spread between JP Morgan 2.083% 2026 (JPM 26's, A) and Bank of America 3.093% 2025 (BAC 25's, A) has increased to its highest level. While JPM 26's have on average traded under BAC 25's, it currently trades 10bps wider (2.8 standard deviations). Holders of BAC 25's have the opportunity to take profits at 38bps and switch into the JPM 26's at 49bps, increasing carry and potentially generating alpha were the spread difference to return to the mean.

Update on Trade Idea posted earlier this week -
Spread difference on Long GM 2.75% 2025/ Short GM 3.5% 2024 trade idea has reverted 10 basis points since initial post.

The spread difference between Entergy Corporation 3.75% 2050 (ETR 50's, BBB) and NiSource Inc. 4.8% 2044 (NI 44's, BBB) has inverted. ETR 50's have historically traded tighter than NI 44's, on average by 15bps, but currently trade 8bps wider (2.7 standard deviations). Holders of NI 44's have the opportunity to increase carry and profit from a potential 23bps reversion were the spreads return to their historical difference.

Sharp tightening in Walgreens Boots Alliance 4.1% 2050 (WBA 50's, BBB) make them look expensive against other BBB credits. Katana identifies the largest dislocation against Charter Communications Operating 5.75% 2048 (CHTR 48's, BBB-), which has on average traded 12bps over WBA 50's and currently trades 43bps over (2.8 standard deviations). Holders of WBA 50's have the opportunity to take profits at 217bps and switch into CHTR 48's at 259bps, with a potential reversion of 31bps were the spread difference to return to the mean.

The spread difference between General Motors Financial Company 2.75% 2025 (GM 25's, BBB-) and the 3.5% 2024 (GM 24's, BBB-) has increased sharply. Both bonds have historically traded within 10bps of each other and on average GM 25s have traded 1bps tighter but currently trade 20bps wider (3.15 standard deviations). Holders of GM 24's have the opportunity to take profits on the recent tightening and switch into GM 25's for higher carry and potential reversion of 21bps.

On 22 December we published the trade idea to buy BP Capital Markets America 2.937% 2023 (BPLN 23's, A) and sell Enterprise Products Operating 3.75% 2025 (EPD 25's, BBB+) at a spread difference of 6bps. Since then the spread difference has compressed by 19bps.

The spread difference between MetLife 4.55% 2030 (MET 30's, A-) and KKR Group Finance Co. VI 3.75% 2029 (KKR 29's, A) has been inverted. MET 30's have on average traded 38bps under, but as KKR 29's have tightened the spread is now 3bps over (2.15 standard deviations). Holders of KKR 29's have the opportunity to take profits at 73bps and switch into MET 30's at 76bps.

The dislocations in Bank of America and AT&T curves identified earlier this week have been corrected. On Monday we published an idea to buy Bank of America 3.366% 2026 and sell the 2.456% 2025 at a spread difference of 35bps. The spread narrowed to 1bps the day after and is currently at 15bps.

On Tuesday we identified an idea to buy AT&T 3.65% 2051 and sell the 3.3% 2052 at a spread difference of 22bps. The spread has come back all the way to 2bps and is currently at 7bps.

The spread difference between Enterprise Products Operating 4.15% 2028 (EPD 28's, BBB+) and MPLX 4.25% 2027 (MPLX 27's, BBB) has been inverted. EPD 28's have on average traded 67bps tighter than MPLX and currently trade 4bps wider (2.8 standard deviations). Holders of MPLX have the opportunity to take profits at 89bps and switch into the better-rated EPD at 93bps, with potential alpha of 70bps where the spread difference return to the mean.

The spread between AT&T 3.65% 2051 (T 51's, BBB) and 3.3% 2052 (T 52's, BBB) has increased sharply as the T 52's tightened while the T 51's widened. The T 51's have on average traded 3bps over the T 52's and currently trade 22bps over (3.3 standard deviations). Holders of T 52's have the opportunity to take profits at 191bps and switch into the T 51's at 213bps, increasing carry and potentially generating alpha of 19bps where the spread difference return to the average.

The spread difference between Bank of America Corporation 3.366% 2026 (BAC 26's, A) and 2.408% 2025 (BAC 25's, A) bonds has widened sharply. BAC 25's have tightened from 44bps to 16bps, while BAC 26's have remained stable at 51bps. The spread difference, which on average on average has been 6bps during the last 12 months hans increased to 35bps (2 standard deviations). An opportunity for holders of BAC 25's to take profits and increase carry.

The spread between BP Capital Market America Inc. 2.937% 2023 (BPLN 23's, A) and Enterprise Products Operating LLC 3.75% 2025 (EPD 25's, BBB+) has been inverted in the last week. BPLN 23's have on average traded 29bps tighter to EPD 25's but is currently trading 6bps over (3 standard deviations). Holders of EPD 25's have the opportunity to take profits at 28bps and switch into the better-rated BPLN at 34bps, with expected compression of 35bps were the spread difference to return to the mean.

The spread difference between Berkshire Hathaway Energy Company 4.5% 2045 (BRKHEC 45's, A-) and Essential Utilities, Inc. 3.351% 2050 (WTRG 50's, BBB) has increased to the highest level in the last 12 months. While BRKHEC 45's have on average traded 6bps under WTRG 50's, they currently trade 16bps over (2.4 standard deviations). Since mid-November, when both credits traded at 160bps, WTRG 50's have tightened to 145bps while BRKHEC 45's have widened to 161bps.

The spread difference between PPL Capital Funding Inc. 4.125% 2030 (PPL 30's, BBB) and NRG Energy Inc. 3.75% 2024 (NRG 24's, BBB-) is inverted. While PPL 30's have on average traded 14bps through NRG 24's, they currently trade 30bps over (2.1 standard deviations). Holders of NRG 24's can take profits at 74bps and switch into PPL 30's at 104bps, with an expected compression of 44bps if the spread difference returns to the mean.

The spread difference between Raytheon Technologies Corporation 3.125% 2050 (RTX 50's, BBB+) and Caterpillar Inc. 5.2% 2041 (CAT 41's, A) has widened sharply. RTX 50's have on average traded 3bps over CAT 41's, however as CAT 41's tightened RTX 50's have widened, increasing the spread difference to 25bps (2.2 standard deviations). Holders of CAT 41's have the opportunity to take profits at 113bps and switch into RTX 50's at 138bps, with a potential compression of 22bps were the spread difference return to the mean.