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Daily Archives: 9th July 2018

9th July 2018

Breathless on Brexit

MARKET CLOSE:
iTraxx Main

67.7bp, -1.7bp

iTraxx X-Over

302.0bp, -3.3bp

🇩🇪 10 Yr Bund

0.30%, +1bp

iBoxx Corp IG

B+133.7bp, -2.4bp

iBoxx Corp HY

B+379.9bp, -6.1bp

🇺🇸 10 Yr US T-Bond

2.85%, +2bp

🇬🇧 FTSE 100

,
🇩🇪 DAX

,
🇺🇸 S&P 500

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Grumpy ol’ day…

The market might be open for new deals, but few are choosing to jump through the window and get a deal on the screens. It started off like a grumpy old session, albeit moderately positive but like a real Monday in July – few were taking any chances.

The Brexit situation took centre stage amid several ministerial resignations following the publication of the White Paper now put forward to the EU detailing the UK’s negotiation stance. No doubt, if current form prevails, the EU will straight bat it back – and then we can expect the real carnage within the Tory government to begin.

Away from that and in credit markets specifically, the borrowers were covered bond issuers, several senior bank deals and a short-dated sub-benchmark dated floater which offered slim pickings to get us started for this week. And so the primary market slump goes on. We were fairly comfortable that issuance could potentially be a little more prolific given the lower levels of deal flow we have been served up with this year so far. After all, the demand is intact for most primary offerings given the high levels of sidelined cash.

However, it is probably time to throw in the proverbial towel given the distractions we have from the World Cup and President’s Trump visit to European shores starting later this week. Few will want to get involved after next week, just as the holiday season kicks in, meaning and we close up until September.

Just €120bn has been issued in IG non-financials this year, our take on that level and the frustrations derived from it being well-documented in previous comments. The average level of IG non-financial issuance in the 2014-2017 period was around €260bn. It is highly unlikely that the September to December period will offer up much more than €100bn (and that would be going some), meaning that we are most likely going to be left with the lowest level of IG deal flow since the 2012 big Eurozone peripheral crisis year.

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