Market updates

For all of these observations, there is one common observation – yields did not stay at these high levels for very long.

After two COVID-hit years last week the European ABS market decamped once again to Barcelona for the 26th annual AFME & IMN Global ABS conference.

After 18 months of difficult headlines Credit Suisse could ill afford more negative press, and we therefore welcomed its decision to refinance its 7.125% Additional Tier 1 (AT1) bond last week at its first call date.

In fast-moving markets there is no perfect time to provide an update on valuations.

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Inflation rates have been rising for over a year now. While the increasing levels may eventually moderate, inflation is still likely to be with us for some time, especially with the Russian invasion of Ukraine exacerbating post-Covid supply constraints.

Given the widening of spreads in Additional Tier 1 (AT1) bonds, in line with general spread widening across all of credit, the prospect of AT1s not being called on their first call date is beginning to generate a few headlines again.

Soaring Eurozone inflation is forcing the ECB's hand whilst economic conditions would still warrant a more accommodative stance. The expected 75 bps rate increases by the end of the year are meant to remove monetary policy from the mix of factors fueling inflation which, however, is likely to make further inroads into the economy as supply-side pressures persist.

Given inflation has been running hot for more than a year now, it was no surprise to see the recent dip in US data greeted with a muted sigh of relief across the markets.

The past couple of weeks have seen a flurry of new issuance as rates and credit markets have stabilised, and the European summer lull is approaching fast.

In emerging markets much seems to have been priced in already which means we could already be past the trough with a silver lining emerging on the horizon for medium to long-term investors looking to make use of attractive entry points.

We can debate whether the European Central Bank is behind the curve or not, but Christine Lagarde says rates will be in non-negative territory by September.