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Daily Archives: 17th June 2018

17th June 2018

ECB gives credit a leg up

MARKET CLOSE:
iTraxx Main

65.6bp, -0.3bp

iTraxx X-Over

293.0bp, +1.4bp

🇩🇪 10 Yr Bund

0.40%, -4bp

iBoxx Corp IG

B+124.5bp, -0.7bp

iBoxx Corp HY

B+375bp, -1.6bp

🇺🇸 10 Yr US T-Bond

2.92%, -3bp

🇬🇧 FTSE 100

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🇩🇪 DAX

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🇺🇸 S&P 500

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Time to roll up those sleeves…

The ECB has given every reason for credit markets to get bullish for the next 9 – 12 months. They’re not moving on rates. Admittedly, QE is ending, but fundamentals remain supportive and technicals will take on a different – but also supportive – dynamic. The bid for rates makes credit even more attractive. US rates are cheap (with the 10-year stuck in  2.75-3% range) versus Bunds/Gilts/JGB markets and the 10-year there has a solid bid behind it, adding to the flattening of the curve. Higher US policy rates might dampen inflation levels over the medium term, too. Credit has lost some of its lustre this year after a positive start, and spreads have gapped wider in all sectors. We think that they might be due for a spell of tightening now.

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