Suki Mann

Author Archives: Suki Mann

28th May 2020

📈 Record Month for IG corporate Issuance – Again

The walking dead? Naah… We’re at the end of May, and it’s been a good month. Recovery has set in (almost everywhere). We’ve bottomed in macro with lockdowns easing and economic activity is off the floor. Asset prices are rising and whether that’s justified or not, investors are adding risk in the expectation that we […]
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27th May 2020

🏥 Markets defy gravity, again

MARKET CLOSE:
iTraxx Main

71.6bp, -1.6bp

iTraxx X-Over

431.3bp, -13bp

🇩🇪 10 Yr Bund

-0.42%, +1bp

iBoxx Corp IG

B+178bp, -8bp

iBoxx Corp HY

B+588bp, -26bp

🇺🇸 10 Yr US T-Bond

0.67%, -3bp

🇬🇧 FTSE 100

6049.62, (-1.73%)
🇩🇪 DAX

12489.46, (-0.04%)
🇺🇸 S&P 500

3152.05, (-0.65%)

Bullish mood persists…

The markets are determined to finish the month with a flourish, whilst attempting to recover much of the lost ground at the same time. There are bullish times as we seek to recover from the devastation wreaked by the Covid-19 global economic lockdown. If those vaccines, recovery medicines like Remdesivir and antigen tests are filled out en masse then we are looking at more risk asset pricing upside through June.

A good bid for equities as they look beyond the current data and into Q3/4 is likely. (Headline) event risk is the derailing factor – Hong Kong, for example. Rates might tread water in a narrow trading range grappling with masses of supply, any deflationary forces and central bank buying programmes. Credit spreads will go tighter and if the default outlook doesn’t come in as bad as currently projected – which is more than likely, then the high/low beta compression trade is back.

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26th May 2020

🗞️ Headwinds, but markets bullish

We shall overcome… The relief trade is in full swing. Relief that the global economy has started the engines and that we are getting back to business, albeit some of the mood might be tempered by ongoing second wave virus and US-Sino relationship concerns. At the moment, equities are flying in anticipation. The S&P is […]
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25th May 2020

🇭🇰 Opportunity Knocks for China

MARKET CLOSE:
iTraxx Main

80.2bp

iTraxx X-Over

478.3bp

🇩🇪 10 Yr Bund

-0.50%, unchanged

iBoxx Corp IG

B+194bp, unchanged

iBoxx Corp HY

B+634bp, -3bp

🇺🇸 10 Yr US T-Bond

0.65%, -3bp

🇬🇧 FTSE 100

6049.62, (-1.73%)
🇩🇪 DAX

12489.46, (-0.04%)
🇺🇸 S&P 500

3152.05, (-0.65%)

Impeccable timing and opportunism amid the distraction…

China is going to take over Hong Kong in every sense of the word – and sooner, rather than later. They won’t be rowing back on the latest security legislation. That is that for Hong Kong as we knew it. The question is whether the Trump administration (and the world, in that sense) blinks despite the strong words from Pompeo. We might have to.

China’s Xi has prepared the ground for a drawn-out battle. The world is in Covid-19 disarray and China is seizing the moment. The stirrings of this geopolitical situation will have markets gripped this side of November. Market volatility is sure to follow.
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21st May 2020

💷 BOUGHT: Shop Direct 7.75% November 2022

Market recovery begins…

After an early to mid-May hitting of the proverbial brick wall, credit spreads have resumed their tightening trend. In the high yield market, the Markit iBoxx index has tightened by 14bp in the month to B+641bp – or by 35bp against the mid-May wide. There will be no miracle ratchet tighter because a lot of bad news is still to come, but we are unlikely going to witness a massive blowout in spreads either. We anticipate a steady tightening in credit spreads as macro recovers.

We’ve had more than what could be deemed a spate of issuance, too, with €3.8bn HY debt issued in the euro-denominated market, although we did have Sappi pull their deal as market volatility abruptly ended their ambitions. We don’t doubt that they will be back.

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19th May 2020

📊 Landmark: IG Issuance at €200bn

MARKET CLOSE:
iTraxx Main

81.7bp, -2bp

iTraxx X-Over

489.2bp, -10bp

🇩🇪 10 Yr Bund

-0.46%, +2bp

iBoxx Corp IG

B+202bp, -4bp

iBoxx Corp HY

B+652bp, -15bp

🇺🇸 10 Yr US T-Bond

0.72%, -2bp

🇬🇧 FTSE 100

6049.62, (-1.73%)
🇩🇪 DAX

12489.46, (-0.04%)
🇺🇸 S&P 500

3152.05, (-0.65%)

And still lots to play for…

Equities’ performance for May to date is about flat. In credit, IG total returns (iBoxx) are at -1%, and the same in HY while the AT1 market is showing -2.2%. iBoxx index spreads are +10bp, -3bp and +40bp, respectively, in May so far.

Yet the corporate bond market is still being seen as the ‘go-to’ market – or, certainly, that’s what primary is telling us.

There is cash to invest, and investors need to get it to work. We still have 7 months to go in which to worry about performance for 2020. As long as the inflows are incoming, that’s good enough for now. And if we are looking at a recovery in macro sometime beginning in the second half of the year, credit spreads will be dragged tighter along with any rise in risk asset valuations.

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18th May 2020

🌅 And the outlook is bright(ening)

MARKET CLOSE:
iTraxx Main

83.8bp, -6.8bp

iTraxx X-Over

499.2bp, -41bp

🇩🇪 10 Yr Bund

-0.47%, +6bp

iBoxx Corp IG

B+206bp, -1bp

iBoxx Corp HY

B+666bp, -10bp

🇺🇸 10 Yr US T-Bond

0.71%, +7bp

🇬🇧 FTSE 100

6049.62, (-1.73%)
🇩🇪 DAX

12489.46, (-0.04%)
🇺🇸 S&P 500

3152.05, (-0.65%)

Economic engine revving up…

Markets are looking at that glass as half-full. As the world economy begins to re-open and we generate greater levels of activity, the hope is that we are picking ourselves up off the floor and moving on – in a sustainable upward trajectory. The data through May will be dire, but in a sense, it will be backward-looking. There will be the headline and other risks that markets will have to contend with for months to come, but there is a good chance we can mostly trend higher in risk valuations.

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17th May 2020

⚖️ Delicately poised

MARKET CLOSE:
iTraxx Main

90.2bp, +0.7bp

iTraxx X-Over

540bp, +4bp

🇩🇪 10 Yr Bund

-0.53%, unchanged

iBoxx Corp IG

B+207bp, +1bp

iBoxx Corp HY

B+676bp, +3bp

🇺🇸 10 Yr US T-Bond

0.65%, +3bp

🇬🇧 FTSE 100

6049.62, (-1.73%)
🇩🇪 DAX

12489.46, (-0.04%)
🇺🇸 S&P 500

3152.05, (-0.65%)

Credit market feeling some heat…

The Q1 data is out of the way. And as bad as that quarter was (ending with Eurozone GDP coming in at -3.8%), it was mostly all as expected. April’s numbers are worse (we had US industrial production and retail sales fall off a cliff on Friday), May’s data will barely be better but helped a little by the easing in the lockdowns, although we should stem much of the downward quarterly trend through June. But it will still be bad.

In the meantime, there is still much that can go wrong, even if the markets are looking at H2 with the glass half full. China’s economy is up and running. Each data point from there seems now to boost sentiment. Equities have settled in a new range significantly higher than their late March low levels. Rates seem to have found a floor, too, where benchmark yields have been in a narrow corridor for several weeks. Credit, though, is beginning to feel the pinch a bit.

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14th May 2020

HY Strategy: CMD Portfolio Performance Mid-May 2020

Market Overview

The corporate bond market has made a good comeback of late, mostly evident in the investment grade primary sector. The issuance pace is running at record levels and while April’s monthly deal flow was in itself a record (€57bn), May’s current total suggests it could even surpass that.

Importantly, the reopening of the investment grade market has provided somewhat of a boost to high yield primary. After having drawn a complete blank in the Feb 20 – 15 April period, we’ve since had around €5bn of issuance. Verisure reopened the market, but the likes of Netflix, Stada, Nokia and Synlab have followed.

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13th May 2020

🇩🇪 Germany Inc. steps up the pace

MARKET CLOSE:
iTraxx Main

87.7bp, +3.8bp

iTraxx X-Over

518.9bp, +16.1bp

🇩🇪 10 Yr Bund

-0.53%, unchanged

iBoxx Corp IG

B+201.3bp, +2.5bp

iBoxx Corp HY

B+xxxbp, -+xbp

🇺🇸 10 Yr US T-Bond

0.64%, -5bp

🇬🇧 FTSE 100

6049.62, (-1.73%)
🇩🇪 DAX

12489.46, (-0.04%)
🇺🇸 S&P 500

3152.05, (-0.65%)

Indigestion and too rich, but still gluttonous…

Primary credit markets continue to burst at the seams. It’s not often, in crisis conditions, that we get a HY borrower rated in the mid-single-B area manage to print an upsized deal (from €400m) of €850m! In the IG non-financial market, corporate treasury department suspicions lurk as to the macro outlook, because the deal flow continues at a record run rate.

The IG non-financial market has already seen €190bn issued this year, €37bn of it this month so far. The record month was April, when €57bn got away. The record year was 2019, with €318bn printed. It has to be fear of the post-June/maybe post-summer period. Get the cash on board, worry about holding it at negative rates another time. There’s nothing particularly smart in the process; It’s just fear and following of the herd.

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