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12th May 2019

Hope over fear

MARKET CLOSE:
iTraxx Main

65.9bp, -1.4bp

iTraxx X-Over

280.1bp, -3.1bp

🇩🇪 10 Yr Bund

-0.04%, +1bp

iBoxx Corp IG

B+131.8bp, unchanged

iBoxx Corp HY

B+431.7bp, -1bp

🇺🇸 10 Yr US T-Bond

2.47%, +2bp

🇬🇧 FTSE 100

6144.25, (+1.26%)
🇩🇪 DAX

11657.69, (+1.33%)
🇺🇸 S&P 500

3036.13, (+0.74%)

Scratching one’s head…

Who would have thought? No trade tariff deal and not close to one but equity markets still saw it fit to rally. The US markets were having a stinker before a late rally resulted in a 50-point swing in the S&P during last week’s final session. We’re scratching around for reasons as to why that might have been so. It would appear that investors were trading on the hope that a deal would be reached and that the Chinese (most likely) would cede to the US’s demands. Surely we cannot be looking at a serious global trade war.

The US markets were thinking otherwise for much of the session and were mostly much more circumspect, with equities taking a serious tumble (-1.3% at one stage, S&P) which left the S&P off by around 100-points versus the record high from only a week or so ago. Trump, though, was busy tweeting away, playing the tough guy – but also offering an olive branch to the stressed investment community. And so that late rally.

The rate markets were wary for most of it, as (to some extent) were credit markets. Credit primary continued to deal though, just it has done through much of the volatility we saw last week. Strange that is the case – but it is comforting for the European credit market, even as secondary spreads have come under pressure and there are no guarantees that transactions will trade up on the break. There’s cash that needs to be put to work. Baxter International issued on Friday for €1.5bn via a dual-tranche offering.

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