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Daily Archives: 22nd January 2019

22nd January 2019

Muddling through after a purple patch

MARKET CLOSE:
iTraxx Main

77.7bp, +2bp

iTraxx X-Over

328.5bp, +9.5bp

🇩🇪 10 Yr Bund

0.24%, -2bp

iBoxx Corp IG

B+169.6bp, -0.2bp

iBoxx Corp HY

B+498bp, +3bp

🇺🇸 10 Yr US T-Bond

2.73%, -5bp

🇬🇧 FTSE 100

5937.40, (+2.39%)
🇩🇪 DAX

13100.28, (+2.01%)
🇺🇸 S&P 500

3426.96, (-0.81%)

Credit recovery could be sustainable, if…

The outlook for credit appears reasonably good at the moment. But we need equities to play their part – that is, hold these levels at worst – and if they can then, we are going to see more performance from the corporate bond market. And the high/low beta compression play might be on again, although that might be too much to ask. It’s been a while. We’ve widened too much in both areas of the credit market and while entry levels look more appealing in IG, higher yielding paper (not always necessarily high yield corporate debt) is benefiting from the bid for yield.

Nevertheless, if macro activity can plod along at these lower/moderately declining growth levels, then the high yield corporate bond market is going to look oversold. Already in these early skirmishes of 2019, investors have piled into the bank AT1 market and generated some great returns.

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