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12th March 2020

🗞️ Goodbye Mr President

MARKET CLOSE:
iTraxx Main

127.7bp, +24.7bp

iTraxx X-Over

588.4bp, +112bp

🇩🇪 10 Yr Bund

-0.74%, unchanged

iBoxx Corp IG

B+186bp, +16bp

iBoxx Corp HY

B+650bp, +80bp

🇺🇸 10 Yr US T-Bond

0.88%, +6bp

🇬🇧 FTSE 100

6049.62, (-1.73%)
🇩🇪 DAX

12489.46, (-0.04%)
🇺🇸 S&P 500

3152.05, (-0.65%)

The tide has gone out…

Trump flapped, the market took one in the solar plexus, to coin a phrase. We knew it anyway, and now it is clear – Trump is having his ’emperor has no clothes’ moment. It’s tempting to think it’s all over for him. But it is not about him. The markets have reeled as the authorities across the multitude of jurisdictions have reacted the they think best.

There’s worse to come. After all, the pandemic’s spread is exponential and it is human nature to underestimate exponential trends.

However, the various policy responses over the past few days will bolster the financial markets defences but this is a rear guard battle to try and limit the worst economic impacts of the Covid-19 pandemic.

The UK/BoE went in hard, the ECB underwhelmed but we long knew it didn’t really have the bullets. The lumbering EU needs to loosen the Maastricht fiscal shackles sharpish, while the Fed will certainly cut rates again next week.

Now though is not the time to be buying the dip.

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