Category Archives for "Fixed Income Market"

19th January 2020

🗞️ Starting with a rate cut

If you can’t beat ’em, join ’em… Just two weeks into the New Year and a UK rate cut is just about in the bag. Rallying Gilts and a solid bid for sterling corporate credit has seen the sector outperform – with spreads tighter by 6bp (iBoxx index) and returns already up by 2%. Friday’s […]
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16th January 2020

🗞️ 2020’s credit outlook brightening

Financials and high beta credit hold the aces… Given the solid start to the banking sector’s Q4 reporting season, it does appear that we are potentially set up for the financial sector to lead the rally in stocks and credit in 2020. That’s certainly how investors in credit are looking at it, with financials and […]
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15th January 2020

🗞️ Shades of 2019

It’s almost laughable… We’re into the second week of the new year and the barriers to a risk asset rally are being dismantled. US equities are in the ascendancy and, at this rate, the S&P500 index will be up at 3500 by quarter’s end. There are only around 200 points to go! Even rate markets […]
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12th January 2020

Kitchen sinking it

Easing in tensions boosts markets… Borrowers are throwing the kitchen sink at it. There’s like a big black hole absorbing anything and everything that comes its way. There doesn’t appear to any repricing risk in the near term as the early year exuberance from borrowers and investors alike satisfy both sides of the equation. This […]
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9th January 2020

🗞️ Dropping like flies

First North Korea, now Iran… The scuffle between the US and Iran in the opening week of the year served to reset the date for when we kicked-off for 2020 to Jan 7th. And, as we expected, equities are on the up and credit primary has come out the blocks albeit probably anticipating another event […]
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8th January 2020

🗞️ The show must go on

Drawing a line in the sand… At this rate, we’re going to be in need for some window locks – Just to keep borrowers out! Wednesday was another session flush with corporate bond deals keeping credit markets extremely busy. And that, after what seems like a ‘face-saving’ limited response by the Iranian regime against the […]
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7th January 2020

Dusted Down and Deals Flowing

Champing at the bit… We’re up and running. But not before markets had been rattled by the killing of senior Iranian commander Qasem Soleimani. While tensions will remain elevated amid fears of any retaliation which might emerge against US interests, it seems to have had a short-lived impact on markets. We would think that the […]
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5th January 2020

Time for cool heads

We were raring to go… We wanted to be able say that we’re just a couple of days old and believe that the markets will be champing at the bit to get going. Alas, we row back a bit. The US drone strike in Iran has markets in retreat and on the defensive with pundits […]
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1st January 2020

[Free Content] ᐉ 2020 Outlook: Fortune to Favour the Brave…

MARKET CLOSE 2019:
iTraxx Main

44.2bp

iTraxx X-Over

207.2bp

🇩🇪 10 Yr Bund

-0.19%

iBoxx Corp IG

B+104bp

iBoxx Corp HY

B+345bp

🇺🇸 10 Yr US T-Bond

1.92%

🇬🇧 FTSE 100

7674.56, (+0.85%)
🇩🇪 DAX

13526.13, (+0.72%)
🇺🇸 S&P 500

3329.62, (+0.39%)

There’s some skin left in the game…

It won’t be as exciting in 2020, not least because we will not be looking at 15%+ credit returns from AT1 debt markets, or even close to the 10.7% we saw in high yield – or upwards of 6% in IG. Nor will we be looking at record issuance levels from the IG and HY market. We’re going back to a more normal climate for corporate bond markets. Corporate bonds are meant to be a boring investment:  You know? Buy the bond, clip the coupon, get money back at maturity, invest in the next issue. Welcome 2020.

We should get support for the market from lower levels of IG issuance (-15% versus 2019’s record €320bn), stable to quite likely improving macro and the ECB’s QE related corporate bond purchases. There will be an element of investors being crowded out of IG by the ECB’s manipulative hand (aka 2017), while adding high yield risk as rates (and defaults) remain low for an extended period.

We should be thinking in terms of a little above 1% of total returns in IG – unspectacular (granted!), but the grind tighter will also mean IG spreads are going to close in on their record tights (iBoxx). We could see returns of up to 4% in high yield as a strong bid for higher-yielding paper is sustained through the year. Subordinated debt will be an outperformer again.

So take some risk. We would suggest taking an excess beta portfolio positioning and set up for compression between IG and HY markets (overweighting subordinated debt – both financial and non-financial).

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9th December 2019

Credit tone positive into year-end

Holidays are coming… Finally, the markets are in wind-down mode, although in credit we think that there’s likely going to be the odd, previously unannounced offering in primary – but that’s about it. We can look forward to a ‘busy’ week nevertheless. There’s Lagarde’s inaugural ECB policy meeting which is probably going to gain more […]
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