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Daily Archives: 23rd November 2019

23rd November 2019

Looking to close out

iTraxx Main

49.9bp, +0.2bp

iTraxx X-Over

234.5bp, +0.5bp

🇩🇪 10 Yr Bund

-0.36%, -4bp

iBoxx Corp IG

B+118bp, unchanged

iBoxx Corp HY

B+404bp, unchanged

🇺🇸 10 Yr US T-Bond

1.76%, -1bp

🇬🇧 FTSE 100

6095.41, (+0.76%)
🇩🇪 DAX

12633.71, (+1.15%)
🇺🇸 S&P 500

3185.04, (+1.05%)

China playing the long game…

We should probably start to be thinking in terms of there being ‘no trade deal’ anytime soon. There are many reasons why the Chinese (and the US) ought to agree to one. However, in doing so, it would possibly mean the inevitable shoo-in for Trump who would milk it into a second term, but serve more angst down the line as trade deals elsewhere come under greater scrutiny.

Stretching out the current talks for up to another 12 months (US elections due) might be seen as being bit of an ask, but we just need to cast an eye on those Brexit negotiations which have been ongoing for over three years! If little gets agreed over the next, say, six months then the Chinese negotiators will increasingly gain the upper hand. China can afford to play the long game.

The waters are further muddied by the impeachment hearings – and the potential outcome, as well the Hong Kong rights bill which is expected to be signed in the next week. For markets, we should get used to trading the headline risks and associated volatility, amid weakness in macro as tariffs are duly slapped on Chinese imports to the US.

That volatility will principally take through equity markets, rates will stay around these levels at worst – or yields go lower for choice, and credit spreads will tread water. For credit, high beta risk has been outperforming of late, possibly on the back of the heavy supply burden IG investors are carrying.

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