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Daily Archives: 10th March 2020

10th March 2020

💶 Corporate bonds will get cheaper

MARKET CLOSE:
iTraxx Main

100.8bp, -2bp

iTraxx X-Over

459.6bp, +3bp

🇩🇪 10 Yr Bund

-0.81%, +3bp

iBoxx Corp IG

B+169bp, unch

iBoxx Corp HY

B+562, +94bp

🇺🇸 10 Yr US T-Bond

0.63%, +13bp

🇬🇧 FTSE 100

5510.33, (-5.25%)
🇩🇪 DAX

9632.52, (+1.90%)
🇺🇸 S&P 500

2626.65, (+1.89%)

Weary and wary markets…

Economic recession beckons. Global growth will fall to well under 3% this year, likely close to 2% (2.9% in 2019). There will be huge consequences of that, not least as we reassess the narrative around globalisation. In the meantime, the troops are being mobilised and had the expected bounce in markets.

But it all feels laboured, suspicious and therefore tentative – as if we are fighting a rearguard action and that the next wave is coming. There was little behind the bounce and the gains were faded.

Covid-19 doesn’t understand policy action. The virus will not be controlled or extinguished by looser financial conditions, although they will go some way in assuaging the worst of the markets’ fears pertaining to a financial market meltdown.

Another Fed rate cut is coming – another 50bp before the end of this month is expected. Trump was doing his best, heaping pressure on the Fed. Markets are anticipating the ECB to cut 10-20bp from the refinancing rate on Thursday as well as some sort of expansion of QE as they increase purchases of government and corporate bonds.

So we will be trading a volatile situation, in a playoff between more unfortunate cases/deaths and rate cuts/fiscal splurge to contain the worst of any downside effects.

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