Suki Mann

Author Archives: Suki Mann

19th January 2021

🗞️ Investors positioning ahead of the curve

Biden transforms into markets’ great white hope… The week is going to be one of stops and starts. In corporate primary, we haven’t had much – save for Total SA lifting €3bn of hybrids on Monday – and it’s likely going to be about opportunistic prints from here on. Biden’s inauguration on Wednesday and the […]
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17th January 2021

🗞️ Credit’s in a funny little place

Immune to volatility… The Japanification of the European corporate bond market is reaching its denouement. As it commoditises, investor acceptance (or, rather, frustration) is peaking at the lack of liquidity in secondary. There is a lack of excitement in not being able to transact worthwhile (or enough) relative value trades. Almost like zombies, we follow […]
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13th January 2021

🗞️ US stimulus, recovery…

Will keep the music playing… Another day, another slew of borrowers but… the massive risk-on tone in credit primary has faded. Exuberance in the pricing process from the initial guidance to final terms is getting a little too much for some and the dropouts during that phase can’t be ignored for too much longer. This […]
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12th January 2021

🗞️ Day of reckoning pushed back

No stopping these markets… Much has been thrown at this market, particularly during the last couple of years (US/China trade, Trump, Coronavirus, Brexit and lots more) and now the ‘incitement of insurrection’ impeachment in the US. The next hurdle (it ought not to be) is the Biden inauguration. Yet most are still looking for equities […]
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11th January 2021

⚙️ Primary credit shifts up a gear

Crypto wobbles… A reminder that what goes up, can also come down. That was most evident in the crypto space with double-digit losses highlighting the market’s susceptibility that comes from it lacking the sort of depth that traditional markets might enjoy. It is yet to be seen if this ‘go-to’ market’s decline (Bitcoin came off […]
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10th January 2021

👨‍⚕️ Men in white coats, please

MARKET CLOSE:
iTraxx Main

47.6bp, unchanged

iTraxx X-Over

246.0bp, -1.8bp

🇩🇪 10 Yr Bund

-0.53%, -1bp

iBoxx Corp IG

B+96.4bp, -0.7bp

iBoxx Corp HY

B+342.5bp, -3bp

🇺🇸 10 Yr US T-Bond

1.10%, +3bp

🇬🇧 FTSE 100

6873, +16

🇩🇪 DAX

14,049, +81

🇺🇸 S&P 500

6824, +21

Biden’s inauguration can’t come soon enough…

It surely can’t be as exciting this week. However, risk markets will possibly continue their rally. We are unlikely going to see the big moves of last week as the US stimulus euphoria most likely fades some. The opening rally was about getting ahead of the curve of the announcements due after the Jan 20 US Presidential inauguration. We would expect that it’s about taking baby steps higher from here.

Not least because other issues are emerging which might need a little focus. That is, US political chaos and intrigue. We’re likely going to see a bit of volatility, but the impeachment moves against Trump ought not to cause too much angst in the markets.

The general push higher in equities from now will nevertheless likely lead to a disproportionate tightening in credit spreads as poor secondary market liquidity elicits a good old fashioned squeeze in spreads. We’ve seen a bit of that, but with few chasing the market and waiting for primary, the tightening should accelerate through Q1.

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7th January 2021

💶 Money Talks

MARKET CLOSE:
iTraxx Main

47.6bp, +0.2bp

iTraxx X-Over

247.8bp, +1.4bp

🇩🇪 10 Yr Bund

-0.56%, unchanged

iBoxx Corp IG

B+97bp (-1.5bp)

iBoxx Corp HY

B+345.4bp (-5bp)

🇺🇸 10 Yr US T-Bond

1.07%, +3bp

🇬🇧 FTSE 100

6857, +15

🇩🇪 DAX

13968, +76

🇺🇸 S&P 500

3801, +54

And it CAN sing and dance and it CAN walk…

The liquidity-fuelled markets are on fire. Not even the siege at the US Capitol building could derail markets. Investors have their all on a Biden administration stimulus package anticipated to propel US growth into a fresh orbit over the next couple of years. We’re even making excuses for there to be no rowing back of Trump’s previous tax cuts/breaks. This market wants to rally. There will be a pull back, and it might even be more than a bump in the road, but the path of least resistance is mapped out.

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6th January 2021

♠️ New Kid in Town Holds All the Aces

MARKET CLOSE:
iTraxx Main

47.4bp, -1.2bp

iTraxx X-Over

246.4bp, -7bp

🇩🇪 10 Yr Bund

-0.55%, +3bp

iBoxx Corp IG

B+98.4bp, -1.5bp

iBoxx Corp HY

B+349.5bp, -5bp

🇺🇸 10 Yr US T-Bond

1.05%, +9bp

🇬🇧 FTSE 100

6840, +228

🇩🇪 DAX

13886, +235

🇺🇸 S&P 500

3781, +55

Balance of political power shifts…

The Democrats completed a clean sweep of Congress, giving the Biden administration more control of government and the direction of policy than the Obama administration ever had. Trump will eventually be on his way – somewhere. The dollar printing presses are about to kick into the highest gear. The dollar will come under pressure. Market rates are going up, and most likely quite sharply, in the US.

However, a good bid for equities will be sustained as economic growth dynamics feed into an upbeat medium-term macro narrative. Inflation will possibly – eventually – take hold (but not spoil any party yet). Bitcoin has much potential to rally (store of value and all that). Corporate bond spreads are going significantly tighter.

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5th January 2021

🇺🇸 US Senate vote up in the air

MARKET CLOSE:
iTraxx Main

49.3bp, +1.9bp

iTraxx X-Over

257.5bp, +11.7bp

🇩🇪 10 Yr Bund

-0.58%, +2bp

iBoxx Corp IG

B+100bp, -0.5bp

iBoxx Corp HY

B+354bp, -2bp

🇺🇸 10 Yr US T-Bond

0.96%, +4bp

🇬🇧 FTSE 100

6,612, +40

🇩🇪 DAX

13,651, -76

🇺🇸 S&P 500

3,736, +35

It’s all about control…

Trump is throwing is toys out of the pram, and will eventually be wheeled away. Biden wants total control, the Republicans need a result to pursue a blocking agenda. We have the Georgia upper house election Tuesday, where the result will go a long way in determining the particular dynamics of the US economy over the next few years. Judging by the hesitancy across the markets, it would appear that the State election has been holding back investors during these opening New Year skirmishes. Nevertheless, it is promising thereafter, hopefully unleashing a more bullish trajectory for risk assets.

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4th January 2021

🗞️ We Should All Have Georgia On Our Minds

MARKET CLOSE:
iTraxx Main

47.4bp, -0.6bp

iTraxx X-Over

245.8bp, +3bp

🇩🇪 10 Yr Bund

-0.59%, -1bp

iBoxx Corp IG

B+100.5bp, -0.4bp

iBoxx Corp HY

B+356bp, -2bp

🇺🇸 10 Yr US T-Bond

0.91%, unchanged

🇬🇧 FTSE 100

6,574, +113

🇩🇪 DAX

13,731, +12

🇺🇸 S&P 500

3,701, -55

Not sure it makes much difference, near term…

Georgia matters. That’s because who ultimately controls the summit will determine the direction for markets over the medium term. There are two seats being contested, and if the Democrats take them, they will have control of both houses and be able to push through their $3trn stimulus package – and raise taxes, hard. If Republicans hold them, we stay as we are. Either way, we will get a short term boost (from infrastructure spending mainly).

We need to get through the week, though, before the dust settles. There is the small issue of Friday’s non-farm payroll report (100k consensus, 245k previous) – and all the clues that go with the print in terms of assessing the shape of the US economy. We are set up for a potentially nervous opening few days of the year.

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