Market updates

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.

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.

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.

The most important asset allocation decisions for global investors ought to originate by answering a seemingly simple question: Where in the cycle are we?

The Federal Reserve minutes for meetings held on the 3-4th May were released last night, and for markets that have been beaten up by rates volatility, they provided some interesting takeaways.

With investors having endured a painful period of rising yields in 2022, Mark Holman looks at whether rates weakness or credit spread widening has been most to blame.

European high yield supply has endured its weakest start to a year in over a decade. The total supply to May 13th equalled €12.89bn, a fall of 75% year on year, with the market effectively closed for a large portion of the year.

Consumers are being hit from seemingly all angles at the moment. Higher interest rates are coming, higher inflation is already hitting their pockets hard and economic growth is expected to slow.

As inflation continues to outstay its welcome in the global economy, we have previously discussed the impact of rising input costs on corporates and how crucial pricing power can be in such a challenging environment.

The vast majority of the high yield universe used the attractive funding conditions last year to term out their maturity profiles. In fact, 2022 maturities in both US and European high yield equate to just 1% of their respective indices.

The broad-based sell-off that has faced investors since the start of this year has been all the more painful because of the breakdown in traditional correlations, which has put conventional hiding places out of reach.

Earnings season is now in full swing, and it has undoubtedly been eventful. During the first quarter, companies have had to navigate multiple obstacles, including surging commodity prices, hawkish central bank policies, a Russian invasion, further supply chain disruptions caused by lockdowns in China, and dwindling consumer confidence.

Collateralised Loan Obligations, or CLOs, are bond instruments issued to fund a specific pool of loans, typically senior secured or ‘leveraged’ loans, to companies.

Since the end of last year, central bank officials have been falling over themselves to increase their hawkishness around rates, particularly in the US. Even the ECB Governing Council members have been vocal of late.

CRE ABS offers conservatively structured debt features, with generally short duration exposure and a spread premium rewarding the more intensive underwriting and due diligence required.

TwentyFour Partner and Portfolio Manager, Gordon Shannon, describes the developments of the short term bond strategy in Q1 2022.

TwentyFour Portfolio Manager, Elena Rinaldi, explains how European ABS markets behaved in Q1 2022 and provides her outlook for the year ahead.

TwentyFour Partner and Portfolio Manager, Eoin Walsh, discusses market conditions in Q1 2022 and provides his outlook for the year ahead.

So far, most fixed income asset classes have experienced a tumultuous 2022. With high yield markets bucking the trend in recent weeks, George Curtis takes a closer look at the drivers of the sector’s recent strength and its current opportunity set.

As pressure has been building on Chinese technology stocks given growing regulatory threats, some of the key players in the Chinese internet sector are shifting to a more prudent strategy, pulling back to focus closer on the core business rather than investing in new growth areas.

Despite the ECB's recent review bringing some previously debated points surrounding AT1s to the forefront, we believe any changes would create undesired, real-world consequences if implemented.

With inflation running at 40-year highs in many parts of the world, it is easy to get carried away with making comparisons to the dark economic days of the early 1980s. 

Last week Oodle Financial Services successfully priced its fifth UK Auto ABS transaction, Dowson 2022-1.