Archive

Monthly Archives: November 2020

30th November 2020

🗞️ Here we go again, Higher

MARKET CLOSE:
iTraxx Main

48.9bp, unchanged

iTraxx X-Over

265.5bp, +0.5bp

🇩🇪 10 Yr Bund

-0.57%, +1bp

iBoxx Corp IG

B+104bp, unchanged

iBoxx Corp HY

B+372bp, -2bp

🇺🇸 10 Yr US T-Bond

0.85%, unchanged

🇬🇧 FTSE 100

6,266, -101

🇩🇪 DAX

13,291, -45

🇺🇸 S&P 500

3,621, -17

Bitcoin No1 so far…

Mostly, markets took a breather in the month’s final session and gave a bit back. But the end of month declines in traditional risk markets didn’t detract from a quite remarkable November for risk markets. Crypto led the way as Bitcoin’s sharp bounce back – after a significant, so-called ‘corrective’ tumble, which incidentally also leaves it as the overall winner for the year to date (price per coin over 250% higher). More broadly, the path of least resistance for most risk asset prices is higher.

We are not priced for perfection. But investors are buoyed by the US election result (back to political predictability) and the coronavirus vaccine developments (administered likely from next week). The latter which should help see an end to the dire macro situation, and where the only way is up/recovery in 2021.

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29th November 2020

🗞️ 2020’s final countdown begins

MARKET CLOSE:
iTraxx Main

48.7bp, -0.7bp

iTraxx X-Over

265.0bp, -3.4bp

🇩🇪 10 Yr Bund

-0.59%, unchanged

iBoxx Corp IG

B+104bp, unchanged

iBoxx Corp HY

B+374bp, -1bp

🇺🇸 10 Yr US T-Bond

0.86%, -2bp

🇬🇧 FTSE 100

6,367, +4.65

🇩🇪 DAX

13,335, +49.11

🇺🇸 S&P 500

3,638, +8.7

Crypto way out in front…

As we close out November, IG credit (iBoxx index) total returns come in at 1.1% on spreads 22bp tighter, and the index is back to flat for 2020. The HY market is up 4% in the month. The FTSE has rocketed 13.5% higher so far in the month and the S&P 10%. Global equities have had their best month, ever.

Bitcoin’s worth more than a mention, having wobbled last week – thought to be a correction (sizeable at that) Its price has recovered much since and is higher by over 30% in November – and by 360% since the March 2020 low.

November’s been a fantastic month for risk markets. Everything from oil to equity markets to credit have seen such massive performances that investors’ returns for the year have recovered their respectability. It wasn’t looking so great into the coronavirus second wave, but the various COVID-19 vaccine developments have unlocked the rally.

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26th November 2020

💷 HY Strategy: 20.2% Returns Since April

Market Overview

We are into the home straight for 2020, but one can be forgiven for thinking that the roller-coaster ride might still have a few twists and turns to come yet. As it stands, markets have staged the most incredible of recoveries. There has been much hope littered with periods of fear. Everything has been smoothed over by lashings of central bank liquidity and more recently, the coronavirus vaccine news.

Risk market prices had hit rock bottom back in that early March/April period, but without quite falling out of bed. But we go into the final weeks of the year with the US markets at or around record highs. European markets are at or around being in the black for the year.

Rates have remained better bid throughout. Credit spreads in IG are remarkably flat year to date and we are in positive territory in total return terms in IG and HY (iBoxx index).

(Bit) coining it in

The stand-out market though is a non-standard market. It’s the crypto sphere – and Bitcoin in particular. Given huge credibility afforded by Paypal’s most recent participation in the crypto currency, we have seen a remarkable – almost exponential, rise in Bitcoin’s price. It’s not for the faint-hearted, though.

Its price has taken a hammering in Thursday’s session, losing 10% (or $2k per coin) in what is probably a correction, but is still higher by 300% since March, generating option-like returns for investors. Now it’s at around $17,000 USD a coin and some forecasts have it pitched up at more than $100,000 a coin by the end of 2021.

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24th November 2020

🎈 Markets lift off again

MARKET CLOSE:
iTraxx Main

48.6bp, -2.5bp

iTraxx X-Over

264.3bp, -11bp

🇩🇪 10 Yr Bund

-0.57%, +1bp

iBoxx Corp IG

B+104bp, -2bp

iBoxx Corp HY

B+379bp, -9bp

🇺🇸 10 Yr US T-Bond

0.88%, +2bp

🇬🇧 FTSE 100

6,432, +98

🇩🇪 DAX

13,292, +165

🇺🇸 S&P 500

3,633, +56

It’s the moon next…

Judging by the level of market activity, a fear of missing out has returned and must be the dynamic driving the rally. The US Thanksgiving break has just about arrived and it has seen investors pile in ahead of it. We’re not going to see much after Wednesday’s session, with normal business resuming some time next week. S&P is soon to be having a look at 3,700 again, the Dow is up through 30,000 for the first time ever and the Dax is back in the black for the year. Bitcoin is a hair’s breadth from its own record high.

There is a clear bias in the risk pricing dynamic to the upside although one could argue that the big, exciting moves higher ought to be harder to come by – perhaps needing something out of the ordinary to help. Trump finally conceding office isn’t one of them, although US political certainty will help at the margin.

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22nd November 2020

🗞️ Corporate bond market in a sweet spot

MARKET CLOSE:
iTraxx Main

51.7bp, +0.7bp

iTraxx X-Over

280.8bp, -1.4bp

🇩🇪 10 Yr Bund

-0.59%, -2bp

iBoxx Corp IG

B+106.4bp, unchanged

iBoxx Corp HY

B+395bp, -1.5bp

🇺🇸 10 Yr US T-Bond

0.83%, -2bp

🇬🇧 FTSE 100

6,351, +17

🇩🇪 DAX

13,137, +51

🇺🇸 S&P 500

3,557, -24

IG spreads heading for record tights in 2021…

We’re into Thanksgiving week, but it’s not quite a case of ‘that’s all folks’. There ought to be a flurry of activity into the long break, but next week still offers investors a chance to get involved or not. That depends on the Black Friday/Cyber Monday sales efforts, albeit clouded this year by the impact of the coronavirus pandemic-induced lockdowns on retail shopping patterns.

As it happens, there are plenty of reasons to be bullish risk assets into year-end and to anticipate a continuation of any rally through Q1/2021 at least.

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19th November 2020

🗞️ Corporate bond markets’ clear direction

MARKET CLOSE:
iTraxx Main

51.0bp, +1.1bp

iTraxx X-Over

282.2bp, +2.2bp

🇩🇪 10 Yr Bund

-0.57%, -2bp

iBoxx Corp IG

B+106.6bp, unchanged

iBoxx Corp HY

B+396bp, unchanged

🇺🇸 10 Yr US T-Bond

0.85%, -3bp

🇬🇧 FTSE 100

6,336, -49

🇩🇪 DAX

12,086, -116

🇺🇸 S&P 500

3,562, -5

Brakes applied, except in primary…

It seems like markets have hit the proverbial brick wall. After a massive relief rally on the back of coronavirus vaccine developments, any fresh news on them isn’t eliciting the same euphoric response (if any at all). Buy the rumour, sell the fact of course. Now it’s the hard macro facts that are dominating. The second wave virus spread is bashing down on activity. The Brexit trade talks are reaching their denouement. And the EU’s 2021 – 2027 budget has come up against resistance from Hungary and Poland, leaving the region potentially facing a budget crisis. The usual fudge beckons.

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18th November 2020

Corporate bonds? Naaah, ₿itcoin

MARKET CLOSE:
iTraxx Main

49.9bp, -0.1bp

iTraxx X-Over

280.0bp, -5.9bp

🇩🇪 10 Yr Bund

-0.56%, unchanged

iBoxx Corp IG

B+106.5bp, -0.5bp

iBoxx Corp HY

B+396bp, -3bp

🇺🇸 10 Yr US T-Bond

0.87%, unchanged

🇬🇧 FTSE 100

6,384, +19

🇩🇪 DAX

13,199, +65

🇺🇸 S&P 500

3,613, +4

Bitcoin’s rise has been relentless…

We really should be talking about Bitcoin, because that’s where the action is. We are at, or around, record highs in the US equity markets as the S&P and Dow look to imminently test 3,700 and 30,000, respectively. Such excitement. But The leading cryptocurrency’s exponential gains since early September have seen its price close to hitting its own intraday high, last recorded back in late 2017. That’s much more impressive.

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16th November 2020

💪 Markets get another shot in the arm

MARKET CLOSE:
iTraxx Main

49.8bp, -2.4bp

iTraxx X-Over

285.0bp, -12.8bp

🇩🇪 10 Yr Bund

-0.55%, unchanged

iBoxx Corp IG

B+107bp, -1.6bp

iBoxx Corp HY

B+402bp, -10bp

🇺🇸 10 Yr US T-Bond

0.90%, unchanged

🇬🇧 FTSE 100

6,419, +103

🇩🇪 DAX

13,145, +68

🇺🇸 S&P 500

3,622, +37

The only way is up…

It used to be that case that easier policy elicited euphoria in risk markets. Now it’s drugs. We were already feeding off the positive close last week in the US and weekend news that Trump might be softening his stance about his leaving office. But then the big drugs news from Moderna which suggested that its vaccine demonstrated greater efficacy than the BioNTech/Pfizer one – and appears more flexible (lower storage temp and longevity once thawed) gave risk markets a jolt.

The Asian markets were gung-ho themselves, anyway, playing into the upbeat Chinese data (retail sales) but also boosted further by the historic pan-Asia, 15-country free trade-pact which was agreed over the weekend. What’s not to like?

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15th November 2020

🗞️ Still plenty of market upside

MARKET CLOSE:
iTraxx Main

52.2bp, -0.2bp

iTraxx X-Over

297.8bp, -1.4bp

🇩🇪 10 Yr Bund

-0.55%, unchanged

iBoxx Corp IG

B+109bp, unchanged

iBoxx Corp HY

B+412bp, +1.5bp

🇺🇸 10 Yr US T-Bond

0.89%, unchanged

🇬🇧 FTSE 100

6,136, -23

🇩🇪 DAX

13,076, +24

🇺🇸 S&P 500

3,585, +48

Despite the virus second waves…

Judging by the market movements over the past few ‘post-rally’ sessions, some concern has taken over investors’ thinking on second wave pandemic coronavirus cases surging through Europe and the US. The soul searching has left rates almost suddenly better bid. Equities have edged off the recently achieved record highs but could easily bounce back. Credit spreads squeezed hard initially but are now probably in the process of re-establishing a fresh trading range at tighter levels, needing the push from higher equities to elicit any material spread tightening response.

It is clear that there is much circumspection on the dynamics of any macro recovery and the time it will take for a vaccine to make a real difference. There is a vaccine in the works – maybe two or three more that will ‘do the job’, but when?

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11th November 2020

🗞️ Readying for the next big leg higher

MARKET CLOSE:
iTraxx Main

50.4bp, unchanged

iTraxx X-Over

293bp, +3bp

🇩🇪 10 Yr Bund

-0.51%, -2bp

iBoxx Corp IG

B+108bp, -1bp

iBoxx Corp HY

B+409bp, -1bp

🇺🇸 10 Yr US T-Bond

0.96%, unchanged

🇬🇧 FTSE 100

6,382, +86

🇩🇪 DAX

13,216, +53

🇺🇸 S&P 500

3,575, +30

Near term ‘V’ anticipated…

After the euphoria, now there is calm – and the need to take a sober look at the situation. It’s going to be bright for markets, we believe. The economic normalisation process – albeit if only back to pre-pandemic levels of activity will elicit a bullish investor response and risk asset valuations will rise, potentially quite significantly.

Obviously, Trump is still hopeful. But Biden will surely be inaugurated. We have news of a vaccine and that will be the predominant driver for the rest of this quarter’s performance. There’s been a little circumspection about the vaccine from some quarters, but the Pfizer/BioNGen effort will be added to by others. We should therefore be nearing the endgame of the constant lockdowns and find a floor and that is what the markets are cock-a-hoop about.

Growth will turbocharge off it but that doesn’t mean we have suddenly found the answer to all the macro ills that were blighting the landscape before the virus took hold.

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