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.

The spread difference between Norfolk southern Corporation 3.942% 2047 (NSC 47's, BBB+) and the 4.837% 2041 (NSC 41's, BBB+) has inverted. NSC 47's have traded 4bps tighter than the NSC 41's on average during the last 12 months. Since early December the spread has inverted and currently NSC 47's trade 19bps over the NSC 41's (2.8 standard deviations). Holders of fNSC 41's have the opportunity to take profits on the recent tightening at 128bps and switch into the NSC 47's at 147bps, with an expected reversion of 23bps where the spread difference to return to the mean.

The spread in long-dated CNOOC and Sinopec bonds has widened in the last weeks, but CNOOC has moved further. While the credit spread of Sinopec Group Overseas Development (2018) Ltd 4.6% 2048 bonds (SINOPE 48's, A+) has increased by 10bps since mid-November, that of CNOOC Finance (2014) ULC bonds (CNOOC 44's, A+) has moved by 40bps. Over the last 12 months CNOOC 44's have traded 2bps wider to SINOPE 48's; the difference has increased to 31bps (3.9 standard deviations).

Wells Fargo & Company 5.013% 2051 bonds (WFC 51's, A) have traded 14bps tighter than the Prudential Financial 4.35% 2050 bonds (PRU 50's, A-) on average during the last 12 months. As the spread on PRU 50's has narrowed faster since early November, the difference has been inverted and currently WFC 51's trade 17bps over (2.6 standard deviations). Holders of PRU 50's have the opportunity to take profits at 150bps and switch into the 1-notch-better-rated WFC 51's at 157bps.

We revisit three trade ideas from a month ago.

On November 6 we identified a dislocation between Philip Morris International 4.375% 2041 (PAM 41's, A) and Anheuser-Bush Inbev Worldwide 4..35% 2040 (ABIBB, BBB+). The spread difference has narrowed from +6bps over to -10bps.

On November 10 we identified that Qualcomm 3.25% 2050 (QCOM 50's, A-) was trading tight to IBM Corp. 3.6% 2039 (IBM 39's, A). The spread difference has narrowed from 36bps to 21bps.

On November 12 we identified that Merk & Co 4% 2049 (MRK 49's, A+) was trading wide to UnitedHealth Group Inc. 2.9% 2050 (UNH 50's, A). The spread difference has narrowed from 6bps to -2bps.

Sudden widening in Wall Greens Boots Alliance spreads has resulted in a significant dislocation in the curve. While the the credit spread on the 4.65% 2046 bonds (WBA 46's, BBB) has gone from 254bps to 291bps, the 4.1% 2050 bonds (WBA 50's, BBB) have only widened from 240bps to 257bps. The WBA 46's have traded 13bps over the WBA 50's on average during the last 12 months and currently trade 34bps over (3.3 standard deviations). Holders of WBA 50's have the opportunity to increase their carry and could generate 22bps of alpha were the spread difference revert to the mean.