Daily Archives: 15th March 2020

15th March 2020

🗞️ No FOMO for Us – Only Fear

iTraxx Main

111.5bp, -16bp

iTraxx X-Over

526.8bp, -62.4bp

🇩🇪 10 Yr Bund

-0.58%, +16bp

iBoxx Corp IG

B+188bp, +2bp

iBoxx Corp HY

B+661bp, +10bp

🇺🇸 10 Yr US T-Bond

0.98%, +13bp

🇬🇧 FTSE 100

6049.62, (-1.73%)
🇩🇪 DAX

12489.46, (-0.04%)
🇺🇸 S&P 500

3152.05, (-0.65%)

We’re all scientists now…

Judging by that equity market price action in the US (+9%), one would think that the markets were convinced that monetary and fiscal easing are the cure for Covid-19. That was some melt-up. It had ‘fear of missing out’ written all over it. This week it will just be ‘fear’.

The investment landscape is about to worsen – markedly. This is no time to get involved. There are going many more big dips ahead of us. Because, honestly, we just don’t know where this is going. The general response has been a hotchpotch of action trying to tackle the collapsed veins of the global economy and it failed, for example, with the monetary stimulus. More will come anyway.

If only to try and limit the macro damage – the stents are now going in, in a last throw of the die. The announcements initially by Germany and the EU (US state of emergency followed) of large scale fiscal remedy suggests it might keep the markets ticking over. How can it?

In the markets, equities are displaying the volatility reflective of each headline. Rates are finding themselves in some sort of no-mans-land. Credit has been battered with high yield and the CoCo market, year to date, are sitting on returns of around -11%. Spreads (iBoxx index) have gapped to B+661bp and B+844bp, respectively. As the global shut down accelerates and spreads, we are looking at B+1000bp and north of B+1500bp for those markets, respectively.

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