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Daily Archives: 16th February 2020

16th February 2020

🇨🇳 Hoodwinked

MARKET CLOSE:
iTraxx Main

41.5bp, -0.4bp

iTraxx X-Over

211.7bp, -0.6bp

🇩🇪 10 Yr Bund

-0.40%, -1bp

iBoxx Corp IG

B+101bp, unchanged

iBoxx Corp HY

B+331bp, -2bp

🇺🇸 10 Yr US T-Bond

1.58%, -3bp

🇬🇧 FTSE 100

5510.33, (-5.25%)
🇩🇪 DAX

9632.52, (+1.90%)
🇺🇸 S&P 500

2626.65, (+1.89%)

But undeterred…

The markets are putting up a remarkable fight against a coronavirus-led battering which will derail all of this year’s growth projections. We’re at record highs in the S&P and Nasdaq indices.

IG credit has returned 1.2% year to date, sterling IG 2.4% and the AT1 market 2.9%. Even Eurozone rates have returned 2.4% this year so far! That wasn’t supposed to be the case. Primary credit is functioning well (very well) and there are signs of desperation from investors for new deals, where the lowest rated of borrowers are managing to elicit great demand.

The WHO sent in its staff, and suddenly, the number of coronavirus victims jumped, markedly. What else should we not believe? In reality, few would have believed much coming from the Chinese authorities regarding the coronavirus outbreak.

They have form. Over the decades, for convenience reasons or otherwise, markets have also turned a blind eye on those domestic GDP numbers China has claimed to have achieved.

So we’ve had that big jump in the reported coronavirus victims. Trading the headlines, the equity markets promptly fell. The numbers have been volatile since, but it’s difficult to get a handle on how bad it might still become.

What is a nailed-on certainty is that the disruption to supply chains will persist. Global economic growth will falter through Q2 at least. And we will not make it up thereafter quickly enough to save the numbers for 2020 previously projected.

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