Debt traders are running for the exits as the prospect of dollar-funding pressure surfaces in money markets and hinders the seasonal narrowing of swap spreads.

While issuance of U.S. investment-grade debt has been robust as usual at the start of the year and companies are following the standard playbook of also transforming those fixed-rate liabilities with swaps, spreads haven't widened. That appears to be because what banks pay to fund themselves relative to riskless rates has expanded, a counterforce for spreads.

"It is very odd," said Priya Misra, head of global rate strategy at TD Securities in New York. "A lot of this can be attributed to the rise in Libor. Also a decline in rates has been led by Treasuries amid short-covering, given no new stream of news from the Trump team on tax reforms or fiscal spending."

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