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Daily Archives: 19th January 2020

19th January 2020

🗞️ Starting with a rate cut

MARKET CLOSE:
iTraxx Main

42.6bp, -0.7bp

iTraxx X-Over

207.1bp, -0.6bp

🇩🇪 10 Yr Bund

-0.22%, unchanged

iBoxx Corp IG

B+103.7bp, -1bp

iBoxx Corp HY

B+336bp, -2.5bp

🇺🇸 10 Yr US T-Bond

1.83%, +2bp

🇬🇧 FTSE 100

7042.47, (+0.35%)
🇩🇪 DAX

12774.88, (-0.12%)
🇺🇸 S&P 500

3116.39, (+0.32%)

If you can’t beat ’em, join ’em…

Just two weeks into the New Year and a UK rate cut is just about in the bag. Rallying Gilts and a solid bid for sterling corporate credit has seen the sector outperform – with spreads tighter by 6bp (iBoxx index) and returns already up by 2%. Friday’s horrible and continued decline in retail sales for December (fifth monthly drop in a row) – allied with other weak data during the week, and amid protestations of a cut being needed by various MPC members all suggests an interest rate cut is likely at the next meeting (Jan 30).

There’s little point in hanging around. After all, waiting for a Eurozone or Chinese recovery is not going to bail anyone out.

Although China recorded its slowest annual growth rate in almost 30 years of 6.1% for 2019, it seemed to cheer investors relieved perhaps that the figure at least came in line with expectations. European equities joined the ‘record breaking’ bug. Always in the slip stream of US equity markets, they finally headed into record territory as the bourses across most of Europe set intra-day record highs – save for the FTSE, but that will no doubt come in due course.

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