Daily Archives: 19th March 2020

19th March 2020

💺 That’s it, sit back and wait

iTraxx Main

118bp, -17bp

iTraxx X-Over

677bp, -23bp

🇩🇪 10 Yr Bund

-0.25%, -3bp

iBoxx Corp IG

B+247bp, +3bp

iBoxx Corp HY

B+884bp, +24bp

🇺🇸 10 Yr US T-Bond

1.07%, -19bp

🇬🇧 FTSE 100

6049.62, (-1.73%)
🇩🇪 DAX

12489.46, (-0.04%)
🇺🇸 S&P 500

3152.05, (-0.65%)

Time for a sober re-assessment…

They’re coming thick and fast – and with increasing regulatory. The Fed, BoE, ECB, EU, ECB and BoE again. Rate cuts, asset purchases, fiscal splurges, mantras of ‘whatever it takes’. My, whatever next, helicopter money?

For the investment grade corporate bond market, the crisis in performance for investors probably sees a chink of light at the end of the tunnel. The ECB unleashed its buyer-of-last-resort backstop bid and this has/will go some way in assuaging the worst fears for most of this section of the corporate bond market. The central bank will absorb the outflows as nervous and/or forced sellers unload their holdings and we might have found a floor in spreads.

The very nature of their business models/ratings allows for investment grade corporates – from a credit perspective – to withstand a period of weakness in macro. There will be the obvious and well-documented casualties along the way, but the IG market will be able to get through the spring/summer economic weakness – even if macro has fallen off a cliff.

IG has reacted positively but tentatively but we’re not sure it necessarily helps the primary market establish a ‘clearing’ level for new paper. More interestingly, how will the HY market’s direction map out?

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