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Daily Archives: 15th January 2019

15th January 2019

Voting for a renaissance

MARKET CLOSE:
iTraxx Main

80.7bp, -1.9bp

iTraxx X-Over

333.8bp, -8bp

🇩🇪 10 Yr Bund

0.20%, -3bp

iBoxx Corp IG

B+177.9bp, -0.9bp

iBoxx Corp HY

B+516.4bp, unchanged

🇺🇸 10 Yr US T-Bond

2.71%, unchanged

🇬🇧 FTSE 100

5850.86, (-1.52%)
🇩🇪 DAX

13057.77, (-1.40%)
🇺🇸 S&P 500

3455.06, (-3.57%)

Time to Juncker it…

All eyes were supposed to be on Westminster, but there was a more than a glance on German GDP data. They might have avoided a technical recession with Q4 GDP managing to record a positive result, but Germany did record the lowest GDP growth since 2013, as last year’s expansion came in at 1.5%. That’s down from 2.2% in 2017 and corroborates all the emerging data elsewhere pointing to difficult times ahead on the macro front.

What it might mean is that the EU will need to acquiesce to some of the UK’s demands (namely the Irish backstop) or a hard Brexit will plunge the whole region into even greater difficulty. The UK might not be able to afford much pain in the near term should we go out on WTO terms and a no-deal, but the EU can’t either. It’s time for the latter’s establishment to step-up.

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15th January 2019

Steady, Stable, Sound – thus far | Bank Capital Insights

Decent start to US bank earnings

We had three large US banks (Citi, JPM, Wells Fargo) report Q4 2018 earnings and there were similar attributes in terms of earnings, outlook and similar comments on the state of the US economy.   All three reported sound increases in year-on-year earnings though they fell short in terms of market expectations/forecasts.  All three banks reported ROE close to double digits and reaching their COE.  Also, asset quality and capital metrics look robust and well placed to handle any unexpected sharp economic slowdown.

But, having said that, what is clear is that FICC business is becoming more and more difficult to make decent returns and this despite the massive volatility in rates and currency markets in Q4 2017.  JPM’s 21% drop and Citi 16% drop in FICC does not bode well for other investment banks that are reliant on FICC revenues.

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