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Daily Archives: 27th January 2019

27th January 2019

Event-risk fraught week ahead

MARKET CLOSE:
iTraxx Main

74.5bp, -2.3bp

iTraxx X-Over

321.5bp, -8bp

🇩🇪 10 Yr Bund

0.19%, +1bp

iBoxx Corp IG

B+166.5bp, -2.3bp

iBoxx Corp HY

B+497.7bp, -5bp

🇺🇸 10 Yr US T-Bond

2.76%, +5bp

🇬🇧 FTSE 100

6003.32, (-0.16%)
🇩🇪 DAX

13208.89, (-0.21%)
🇺🇸 S&P 500

3339.19, (-0.46%)

Yield is the key in 2019…

Equity market valuations, when taken in isolation, seem to paint a picture that the macro outlook is bright…or that equities are cheap because rates are going nowhere. The earnings season is upon us and the flow of reports has been quite mixed, but the equity market is looking sprightly. In the meantime, there is no sell-off in rate markets as broad macro economic weakness is underpinning the support for fixed income product. That benchmark 10-year Bund yield is going to struggle to get anywhere near 0.50% this year (currently sitting at 0.19%). If it does, it’s going to need a smooth or no-Brexit, a US/China trade agreement, and a recovery in Chinese and US growth levels closer to 7% and 3% in 2019 against the forecasted 6% and 2%, respectively. Indeed, we don’t see it either.

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