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7th July 2019

Liquidity aplenty, but expensive to hold

MARKET CLOSE:
iTraxx Main

50.2bp, +1.4bp

iTraxx X-Over

243.5bp, +6.7bp

🇩🇪 10 Yr Bund

-0.36%, +4bp

iBoxx Corp IG

B+119bp, -1bp

iBoxx Corp HY

B+399bp, -2bp

🇺🇸 10 Yr US T-Bond

2.03%, +8bp

🇬🇧 FTSE 100

7412.05, (+0.93%)
🇩🇪 DAX

13323.69, (+0.90%)
🇺🇸 S&P 500

3276.24, (+0.98%)

… and greater risks emerging

Until the late pull back when markets were undermined by the minutiae of the timing of any Fed rate cut, it was looking fantastic. Actually, we don’t think it changes much and it is looking very good still. We’re in the midst of the mightiest bond grabfest in history. We have record low bond yields. Corporate funding costs are collapsing. The S&P500 was almost at 3,000 (and up almost 20% this year) is no mean feat, either. It’s record-breaking territory almost everywhere one looks. All that is left is for corporate bond spreads to tighten – a lot – to join the record breakers club. It’s a euphoric time but declining yields/rate cuts/injection of liquidity into markets are no panacea for macro recovery.

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