Category Archives for "Fixed Income Market"

9th July 2020

🗞️ Enough is enough

Primary pace couldn’t just go on and on… It’s not quite the cocksure market we thought it could have been. Credit primary was threatening a pre-earnings blackout-period deluge, but it hasn’t quite arrived. We are at a lower level of deal flow dynamic but ought to see €20bn or so of IG non-financial issuance (around […]
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7th July 2020

💷 HY Strategy Portfolio: 10%+ Profit in Under 3 Months

Market Overview

It’s very early days with a mixed start to the second half, but the key takeaway is that markets can continue to move higher. Economies are generally back in business. In some cases, further policy stimulus is coming, consumer confidence and industrial sentiment are recovering, while manufacturing and service sector activity hauls itself off the floor. It’s been a deep recession but also a ‘V’ recovery to start with.

The risks are clear, though. We have an earnings season coming up which isn’t going to be a good one, virus second waves are in evidence across several jurisdictions, and the US promises a more disjointed recovery as a result. China is being a nuisance in several key areas although it has pulled back (for now) in its confrontation on the disputed border with India.

In credit specifically, however, we are in the midst of a record run-rate in IG issuance, where Q2 saw €50bn or more issued in each of the months – the first time in Eurobond history. Few treasury desks are taking chances of something more sinister later in the year.

At €268bn of IG non-financial issuance year to date, we should be past the record €318bn from last year by the end of September – en route, quite possibly, to €400bn for the full-year.

The high yield market has finally plugged into the narrative. In a 6-week period from late February and taking in the whole of March, we didn’t get a single deal. But the primary machinery has started to churn them out now, with €13bn issued in June and July off to a decent start (€3.4bn).

And the pipeline builds. Last year’s full-year record total of €76.4bn looks like being surpassed IF risk markets don’t fall out of bed between now and year-end.

So the appetite for HY paper is recovering as the overall news flow improves. Low rates ‘forever’ and the ECB’s recent increased QE-related purchases have turned the screw. There’s a subliminal message in there somewhere. The crowding-out effect (in IG) will reinvigorate that bid for higher-yielding corporate debt.

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5th July 2020

🗞️ Plugging into the (initial V-shaped) recovery

As IG primary records broken… The bounce in economic activity (from the early 2020 Q2-lows) will likely continue with a broadly positive trend in asset prices over the summer months. We could still be looking at the potential for US stocks to rise and get close to those record highs seen in February before the […]
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2nd July 2020

🗞️ Yield sells

But all eyes on China… The second half has got off to a promising start. The data is supportive and the main driver for it. Credit primary continues to furnish us with a plethora of deals and the pipeline suggests deals to come throughout a busy July. Covid19 outbreaks and subsequent localised lockdowns are going to […]
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30th June 2020

🍷 Glass is half full

Thanks to the central banks… It’s been a fine recovery-quarter overall, investors relieved that the markets managed to bounce back, taking in the best quarterly performance for several asset classes. And that, just as the coronavirus pandemic threatened financial armageddon. Concerted loosening of policy by central banks/governments did the trick, again. And so the market’s […]
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28th June 2020

🎖️ High Yield Market Fighting On

Headwinds aplenty, but liquidity supportive… Well, ams AG tripped up. Such is the edginess particularly around Germany Inc after Wirecard’s demise, investors had every right to reassess their allocations to the high yield borrowers deal last week. We move on, but it is a rollercoaster ride at the moment. That’s chiefly because Covid19 outbreaks/lockdowns are […]
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25th June 2020

☀️ Summer’s here, but no holiday just yet

Credit still dealing… A calmer session that didn’t quite follow through on the midweek wobble, but be assured that there will be a few more of them before we have a grip on this virus. That wobble was after PMIs and other data showed we were in some sort of a recovery mode, even if […]
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23rd June 2020

🗞️ A new cautious optimism is palpable

Timing. It’s all in the timing… Credit markets, focused on issuance, were excited about the inaugural 4-tranche, €4.5bn offering that came from Exxon Mobil. Not us. It is the Profine issue, which breaks new ground for the high yield market in Europe given the timing of its high coupon deal, during what is still an […]
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21st June 2020

✨ Corporate bonds: Stellar recovery, more to go…

Who would have thought it?… It’s been an excellent recovery for corporate bond investors/portfolio managers over the last 3 months. In the depths of the Covid-19 pandemic panic, the benchmark returns in IG, for example, bottomed at -8% in the period to end March. Few would have thought that getting back to flat or into […]
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17th June 2020

🎶 The music just keeps on playing

Summer of content… The early June wobble over, the markets are back in full swing with the glass being viewed as being half-full. The temptation might be to put some shorts on, but lurking is a policy response to any (impending) weakness, that the upward momentum is soon re-established. Right now, it’s about not fighting […]
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