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2nd April 2020

💉 Corporate bond primary on steroids

MARKET CLOSE:
iTraxx Main

108.5bp, +5.5bp

iTraxx X-Over

612.5bp, +11bp

🇩🇪 10 Yr Bund

-0.44%, +3bp

iBoxx Corp IG

B+251bp, -1bp

iBoxx Corp HY

B+775bp, -8bp

🇺🇸 10 Yr US T-Bond

0.61%, -3bp

🇬🇧 FTSE 100

6144.25, (+1.26%)
🇩🇪 DAX

11657.69, (+1.33%)
🇺🇸 S&P 500

3036.13, (+0.74%)

Not quite broken markets everywhere…

Albeit seemingly on steroids, the only market doing what is says on the tin, in the sense that everyone is satisfied, is the IG corporate bond primary one. We have become used to equities not unusually up or down by 3-5% per session, rates better bid or offered depending on which way the wind blows and secondary credit spreads tighter or wider – no matter what.

Now borrowers are falling over themselves to get deals away. Fund managers might have been barricading the doors at one end to help stem the outflows, but they’re piling into corporate bonds on the other. Coverage ratios are a bit more hit-and-miss now though, perhaps exhibiting signs of investor fatigue.

What was (at first) all about good, solid double-A/high single-A corporates accessing the markets, has become – inside a week – something for triple-B borrowers, too. And that includes peripheral ones.

And it looks as if primary credit markets are getting carried away. We are seeing the issuer rating head lower, and now we are not too far from a high yield borrower getting a deal on the screens. This market has been shut since 20th February. We’ve drawn a complete blank in HY primary for over 6 weeks.

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