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Monthly Archives: December 2019

9th December 2019

Credit tone positive into year-end

MARKET CLOSE:
iTraxx Main

47.35bp, +0.35bp

iTraxx X-Over

220.4bp, +0.3bp

🇩🇪 10 Yr Bund

-0.31%, -2bp

iBoxx Corp IG

B+111.8bp, -0.5bp

iBoxx Corp HY

B+376bp, -1bp

🇺🇸 10 Yr US T-Bond

1.82%, -2bp

🇬🇧 FTSE 100

5897.76, (-1.54%)
🇩🇪 DAX

12313.36, (-0.54%)
🇺🇸 S&P 500

3271.12, (+0.77%)

Holidays are coming…

Finally, the markets are in wind-down mode, although in credit we think that there’s likely going to be the odd, previously unannounced offering in primary – but that’s about it. We can look forward to a ‘busy’ week nevertheless. There’s Lagarde’s inaugural ECB policy meeting which is probably going to gain more market importance than the UK election, both which come up on Thursday. Before that we have the FOMC, but they are also likely to be unmoved. Last week’s stellar non-farm payroll report for November will see investors likely retaining current strategies as they look ahead on how to play it in 2020.

Some big takeaways for this year include the massive and unexpected performances from all markets. Equities in many cases higher by 25% or more, Eurozone rates total returns of 8%+, the AT1 market in excess of a stunning 15% and IG credit in the 6.5% area. In primary, IG non-financial issuance smashed all records (€318bn), Sisal Pay’s €530m deal at the end of last week took the high yield market’s issuance to a record €75.04bn as well. And ten years on after the financial crisis, we’re starting to witness greater levels of financial sector issuance.

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3rd December 2019

Markets Trumped yet again

MARKET CLOSE:
iTraxx Main

50.3bp, +1.3bp

iTraxx X-Over

230.2bp, +4.8bp

🇩🇪 10 Yr Bund

-0.35%, -7bp

iBoxx Corp IG

B+114.7bp, +0.5bp

iBoxx Corp HY

B+386bp, +8bp

🇺🇸 10 Yr US T-Bond

1.70%, -13bp

🇬🇧 FTSE 100

5897.76, (-1.54%)
🇩🇪 DAX

12313.36, (-0.54%)
🇺🇸 S&P 500

3271.12, (+0.77%)

2020: Downside risks lurk…

We have yet another iteration in the process. Does anyone really care any more? We previously suggested that the Chinese could afford – politically and financially – to play the long game regarding the trade tariff talks. With an election looming, the lack of a decent, encompassing deal between the US and China would possibly eat away into Trump’s self-professed, yet questionable, magic regarding his ability in getting a good deal done. Depending on how it is spun, it may well weigh on his re-election hopes – alongside many other issues, of course.

Well, he surprised in the session, suggesting that it might be better that a trade deal waits until after the US elections (next November)! That, after slapping punitive tariffs on Monday on steel and aluminium imports from Brazil and Argentina – as well as threatening the EU (France in particular) with tariffs, and we are almost back to square one. Add to it the spat with France’s Macron at the NATO summit and it’s a case of all hands back to the pump.

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2nd December 2019

Trump still pulling all the strings

MARKET CLOSE:
iTraxx Main

48.8bp, +1.1bp

iTraxx X-Over

225.4bp, +4.6bp

🇩🇪 10 Yr Bund

-0.28%, +7bp

iBoxx Corp IG

B+114bp, unchanged

iBoxx Corp HY

B+378bp, -5bp

🇺🇸 10 Yr US T-Bond

1.82%, +4.5bp

🇬🇧 FTSE 100

5897.76, (-1.54%)
🇩🇪 DAX

12313.36, (-0.54%)
🇺🇸 S&P 500

3271.12, (+0.77%)

Manufacturing fog not lifting…

Well, that was a bit of a rollercoaster ride. We had an early shot in the arm from those Chinese factory orders for November with the Caixin PMI index up at a 3-year high of 51.8. German manufacturing also showed some signs of life, the PMI for November rose to a much better than expected 44.1 (expected 43.8), as France (51.7) and Italy 47.6) also beat expectations.

For the region as a whole, we had still further factory sector shrinkage, the Eurozone’s manufacturing PMI at 46.9 (45.9 previously). Based on those numbers, the headlines ought to have been about macro bottoming out amid some kind of platform possibly being established with which to hopefully launch a moderate recovery dynamic.

Unfortunately drawing on any positives was short-lived, ‘Trumped’ by the Donald, while the US rounded off the manufacturing PMIs with a 48.1 print for November (49.2 expected, 48.3 previously). Ouch!

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1st December 2019

Pre-Holidays Strategy

MARKET CLOSE:
iTraxx Main

47.7bp, -0.3bp

iTraxx X-Over

220.8bp, -1.6bp

🇩🇪 10 Yr Bund

-0.36%, unchanged

iBoxx Corp IG

B+115bp, unchanged

iBoxx Corp HY

B+383bp, -2bp

🇺🇸 10 Yr US T-Bond

1.76%, unchanged

🇬🇧 FTSE 100

5897.76, (-1.54%)
🇩🇪 DAX

12313.36, (-0.54%)
🇺🇸 S&P 500

3271.12, (+0.77%)

Equities performance out in front, fixed income stellar…

Not long to go now in order to clip the kind of performance that is the stuff of dreams. We closed November with risk markets having a final session give-up but having garnered some excellent performance this year.

Records have gone in US equities as the S&P is up by over 25% this year so far. The Dax is up there too, the total return index up 25.3%, whilst the FTSE is up only 9.2% this year in comparison (Brexit/political woes), it could be the ‘go to’ equity market in 2020 if Boris Johnson gets his working majority and funds pile back into UK equities in some sort of relief trade.

IG credit has made 6.4% so far, HY credit 9.6% and the AT1 market over 14%. The primary market has seen records smashed in IG, they’re closing in on the high yield record (still 2 weeks of business to go) while there has been a stellar recovery in senior bank primary supply. And rates. Total returns are just a shade shy of 8%. Fantastic.

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