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9th March 2020

📰 Why you shouldn’t buy this dip!

MARKET CLOSE:
iTraxx Main

104bp, +25bp

iTraxx X-Over

460bp, +90bp

🇩🇪 10 Yr Bund

-0.86%, -13bp

iBoxx Corp IG

B+169bp, +30bp

iBoxx Corp HY

B+562bp, +94bp

🇺🇸 10 Yr US T-Bond

0.51%, -19bp

🇬🇧 FTSE 100

5510.33, (-5.25%)
🇩🇪¬†DAX

9632.52, (+1.90%)
🇺🇸 S&P 500

2626.65, (+1.89%)

Offered only, no bid, spreads gap… any hope?

The worst of days for the markets. Commodities, equities, credit all hammered and rates/safe-havens bid up. The Covid-19 story is not even close to being over, but how much have the markets already discounted? Some will think not enough, others will have an itchy finger (to buy).

Mind, the day’s lurch lower was more driven by the House of Saud’s declared trade war with Russian oil which will now very likely tip the global economy into recession. That 30% oil price cut by the Saudis has demonstrated that it has now become a case of every man and woman for themselves.

In terms of a policy response, urgency is required – as is the need to think outside the box, because the coronavirus’ spread is the global economy’s ‘The Emperor has no clothes’ moment.

It will be revealing in many aspects, from the unraveling of globalisation (interconnected economies, supply chains etc) to the dismantling and possible collapse of our highly indebted markets Рthe latter will expose the fragile structures of the financial system borne from the crisis since 2008.

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