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Daily Archives: 9th September 2019

9th September 2019

Primary Going Gangbusters

MARKET CLOSE:
iTraxx Main

47.9bp, +0.8bp

iTraxx X-Over

239.4bp, +0.9bp

🇩🇪 10 Yr Bund

-0.58%, +6bp

iBoxx Corp IG

B+122.9bp, -0.5bp

iBoxx Corp HY

B+414bp, -2bp

🇺🇸 10 Yr US T-Bond

1.62%, +7bp

🇬🇧 FTSE 100

7167.95, (-0.61%)
🇩🇪 DAX

12670.11, (+0.32%)
🇺🇸 S&P 500

2989.69, (-0.21%)

Records set to be broken…

We’re barely a week into September and we are already looking at records for European credit markets. That comes courtesy of the IG non-financial primary market, but we’re also looking at returns edging higher with each passing week.

Incredibly they are almost into double-digit territory for all fixed income classes. It’s a fantastic effort, just ahead of it becoming odds-on that the ECB (later this week) and the Fed (next week) are about to turn on the liquidity taps.

Government bond yields might have had a decent sell-off a few sessions ago on hopes of a US/Chinese breakthrough and a triumvirate of positive news on the political front which was crammed into a single session. Nevertheless, the former has left us thinking it might be a false dawn – we’ve had plenty of them, while on the politics side there is incredible uncertainty regarding the next move on the Brexit front.

The new Italian coalition might not (likely will not) hold for long. Only the situation in Hong Kong seems to have calmed.

Safe havens have recovered some lustre and central bank action might well be the catalyst to push, for example, that 10-year Bund yield zooming through -0.75% en route to -1.0%. Uncertainty in UK politics is going to take that 10-year Gilt yield to a new record low. A Fed rate cut might be priced in, but cheaper liquidity will prop up US equities and the impact will be to lift all other equity markets.

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