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Daily Archives: 1st September 2020

1st September 2020

🗞️ Kicking off with a bit of style

MARKET CLOSE:
iTraxx Main

52.1bp, -2.1bp

iTraxx X-Over

311.8bp, -9bp

🇩🇪 10 Yr Bund

-0.41%, -1bp

iBoxx Corp IG

B+124.2bp, unchanged

iBoxx Corp HY

B+420bp, unchanged

🇺🇸 10 Yr US T-Bond

0.72%, +3bp

🇬🇧 FTSE 100

5860.28, (+1.29%)
🇩🇪 DAX

12645.75, (+0.82%)
🇺🇸 S&P 500

3465.39, (+0.34%)

Feed the fish…

The marker has been put down as a flurry of deals got us off to a firm start for the month. Getting back to normal (schools and work in the office are the ultimate targets) means that we are also anticipating a bullish month – perhaps period, for risk assets. That 3,700 for the S&P is still a reachable target although we’re going to need the tea leaves well-aligned.

If we are right, that directional trend boosts credit – we will see record annual levels of primary in investment grade and high yield credit. Spreads will recover in IG and AT1 markets more than in plain vanilla high yield, although the latter will see them squeeze tighter. Just how much will depend on the corporate news flow as government support schemes are withdrawn.

Already we are seeing the low rates ‘forever’ regime produce a narrative that equities and other ‘higher yielding’ assets are the places to be invested. The excess systemic (investor) levels of liquidity are going to be chasing those higher yields (corporate bonds) and capital growth (equities and corporate bonds).

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