Category Archives for "Fixed Income Market"

19th November 2017

Mixed signals

Relax, don’t do it… We’ve been through the grinder a bit in these opening couple of weeks of the month, but have managed to stabilise and regain some of the lost performance. The flow in the secondary cash market has not justified in any way the level of weakness that we have had and we […]

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16th November 2017

We’re back, 1000 year deals and all

All is not lost… Just when all looked hopeless, the tide did turn. We are back. Higher equities, flattish in duration and tighter credit spreads. It’s been a while (!) since we could last say any of that. The illiquidity in the offered side of the market ensured we squeezed better as buyers emerged and […]

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15th November 2017

Waiting for the tide to turn

As the jitters persist… We were again greeted by a sea of red across the screens. Those equity markets just don’t want to shake off the feeling that we have probably gone too far on nothing but excess liquidity. So we’re getting a period where the pull-back from those heady heights in all markets is […]

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14th November 2017

Reloaded & ready to go again

Roll up those sleeves… We are having that pull back in spread markets. That little reminder that markets don’t go in any direction for too long before they correct. We had been in bullish mode for well over two months and the weakness last week was probably a timely reminder of the over-exuberance in the […]

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13th November 2017

They’re back!

Some more of the same… The big picture for credit has investors concerned about the level of the market and the timing of ‘the’ correction. That big event is unlikely going to occur just yet. Most will safely assume that 2018 is the timing for that and will use the rest of this year to […]

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12th November 2017

If it was just that easy!

Defeat from the jaws of victory… We came into last week on such high expectations that spreads would continue to squeeze tighter, but we were completely wrong-footed. Not because there was any measurable or obvious better selling cares, or that we had a credit market related event that scuppered those expectations. Nor was it that […]

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9th November 2017

Soggy end to the week

Playing the game… There was a cautious tone to the markets again and after several sessions with that being the case, we must be thinking in terms of a reluctance by investors to chase the markets deeper into record territory so close to year-end. That certainly seems to be the case for European equities, while […]

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8th November 2017

Whacking out the deals

MARKET CLOSE:
iTraxx Main

51.6bp, +1.4bp

iTraxx X-Over

233.3bp, +6bp

10 Yr Bund

0.32%, unchanged

iBoxx Corp IG

B+96.3bp, +1bp

iBoxx Corp HY

B+261bp, +6bp

10 Yr US T-Bond

2.32%, unchanged

FTSE 100

7,380.68, -6.26
DAX

12,993.73, -53.49
S&P 500

2,578.85, -6.79

Primary bursts into life…

There was no midweek lull in the corporate bond market. The credit market was not for taking a break following a couple of days this week of decent primary activity. We had another bunch of deals keeping investors occupied and feeling a little relieved, as cash balances which need to get absorbed before year-end are doing just that. We might just be full-steam ahead into the Thanksgiving break and €2bn or (much) more of non-financial issuance per day at the moment is getting done.

Some will be advised and/or tempted to wait a while, because conditions will remain just as accommodating in Q1 as they are now. It’s just that there will be a gamut of borrowers to contend with, then all looking to get their funding away early once the new year kicks off – so get it in early. Anyway, we weren’t devoid of issuance as the likes of BASF, Union Fenosa and UPS in non-financials amongst others pitted their wares.

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7th November 2017

Tensions rise in Middle East

MARKET CLOSE:
iTraxx Main

50.2bp, +0.8bp

iTraxx X-Over

227.3bp, +3.8bp

10 Yr Bund

0.33%, -1bp

iBoxx Corp IG

B+95.3bp, -0.1bp

iBoxx Corp HY

B+252.2bp, -0.5bp

10 Yr US T-Bond

2.31%, -1bp

FTSE 100

7,380.68, -6.26
DAX

12,993.73, -53.49
S&P 500

2,578.85, -6.79

…but they will soon pass

The markets have had a bullish disposition about them for the best part of three months. Record closes again in the US overnight and a solid rally in Asian stocks, with commodities heading higher helped by that shake-out on the Saudi domestic front along with rising tensions with Iran (oil at 2-year highs) gave us every reason to trade through a rather mixed and eventually weaker session.

A very positive European open was soon faded, with equity indices closing out up to 0.7% lower. It is certainly a case of ‘baby steps’ as far as European equities are concerned, as they make any gains with a more cautious stance versus their global peer groups. And that’s fine, it’s perfectly natural to trade this way and we are hoping that there are no major event-risk driven lurches lower that would ultimately impact the corporate bond markets.

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6th November 2017

(Free content) Corporate bonds: The October 2017 Report

Welcome to the creditmarketdaily.com update for the corporate bond market to the end of October 2017.

October saw the corporate bond market power on, leaving us with record tight levels in the high yield, non-financial hybrid and contingent convertible financial bond markets. We also achieved the record level of supply for the high yield market, surpassing the previous record (€57bn) from 2014.

Credit’s performance was excellent with 10bp of tightening in the IG index in October/returns +2.7% YTD, although the high yield market did better as the index tightened 20bp/returns YTD 6.3%. The higher the risk, the higher the juice, the greater the returns. CoCos sit on top of the pile in every sense.

Supply in high yield for the month of almost €14bn left October as the best month for issuance for several years. IG issuance disappointed at €18bn.

Full spreads charts/analysisIG | HY | Senior & Sub Financials | Corporate Hybrids | GBP Corporates | CoCos


US equities continued to set record highs, almost on a daily basis. Europe followed in their slipstream, and the DAX was up 15% in the year to the end of October. The Dow was up 18%.

The AT1/CoCo market has also has a superb year so far, the iBoxx index for this structured product recording a +17% performance in the opening ten months. Many investors will have gained more than 20% already.

Returns YTD to end of October

Full returns data charts/analysisclick here


IG non-financial supply in October came in at a below-par €18bn and the first ten months of the year are recording €228bn of issuance. We’re €35bn short of the average of the previous few years.

High yield supply for the opening ten months comes in a little shy of €62bn making 2017 a record year for issuance in the high yield market. With the pipeline still fairly heavy, we must be looking at upwards of €67bn in total supply for the full year.

HY Issuance: New Record (Already)

Erratic supply dynamic in senior financials leaves the total for the first ten months of issuance at just €123bn. And for the full-year? €140bn, perhaps.

Full issuance data charts/analysis: IG | HY | Senior Financials

Every issuance deal for the month: IG | HY


The corporate bond market has had a good couple of months such that performance has recovered strongly and higher beta risk has delivered the kind of returns we might have thought would be out of reach. Nevertheless, such is the demand for corporate risk, backed up by continued inflows into corporate bond funds, that we have to think that record spread levels will be maintained and total returns in excess of expectations for an already extremely rich asset class sustained.

There is little reason to change strategy now. Higher beta risk is going to outperform and the compression trade will pay off through the rest of this year. And most likely into the beginning of 2018.

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