Daily Archives: 11th July 2018

11th July 2018

Trump-inspired trade tensions hit markets

iTraxx Main

67.8bp, +1.2bp

iTraxx X-Over

304.3bp, -4.1bp

🇩🇪 10 Yr Bund

0.30%, -2bp

iBoxx Corp IG

B+132.2bp, +0.5bp

iBoxx Corp HY

B+394bp, +2bp

🇺🇸 10 Yr US T-Bond

2.85%, -2bp

🇬🇧 FTSE 100

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🇩🇪 DAX

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🇺🇸 S&P 500

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Don’t bet on it…

Trump hadn’t even left US shores and was already throwing punches in several directions ahead of his first engagement in Europe, with NATO. They landed. The one which hurt the market most was the $200bn of additional Chinese imports that the US administration will seek tariffs on – with the Chinese promising to respond. But the President had harsh words on NATO spending and the reliance of Germany on the Russian gas pipeline to the country, before suggesting how his meeting Putin might be easier than with Theresa May – and finished with some warm words for the UK’s (now) former Foreign Secretary Boris Johnson.

The markets reacted. Stocks took a leg lower in the session losing over 1% while rates managed a better bid to reverse the weakness seen in the previous session. The US 2s/10s was back below 30bp and as low as 26.5bp during the session.

We are, however, into the home straight heading into the market close down for the summer, save for the usual deals we will get in the SSA space through the late July/August period. Others might pop up in the plain vanilla corporate sector in both IG and HY, but it’s going to be a very drab period for the new issue market. Secondary is going to be as predictable we would think, as it will trade in line with equities/sentiment.

If a summer of discontent is ahead of us, we go wider into volatile and weaker equities. Although a more standard, event-risk free 6 weeks will leave us most probably better bid for choice and we will have some positive momentum as we return for the last leg of activity starting September.

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