Market updates

Political chaos is once again taking the headlines in the UK, but bond investors should be cheering the UK regulator’s decision to raise banks’ capital buffers in preparation for an anticipated economic downturn, says Gary Kirk.

With investors seemingly unwilling to put money to work until they see clear evidence of the inflation trend reversing, Felipe Villarroel looks at two developments that tentatively suggest central banks’ delicate balancing act is actually working.

After H1 2022 broke market records for all the wrong reasons, Gary Kirk says fixed income outflows could reverse quickly if investors see evidence that central banks are turning the tide on inflation.

The US high yield market has experienced the third lightest month in terms of new issue flows since the Global Financial Crisis. Chris Holman explains what this means for default rates going into the second half of the year.

Aza Teeuwen explains how market moves have impacted BB CLOs and looks at historic trends analysing their behaviour during crisis scenarios.

At this stage in the economic cycle investors may need to think about ways to protect their portfolios while providing strong relative value. Johnathan Owen explains why short dated investment grade can offer exactly that in his latest blog.

With Fed rate hikes continuing and the economy progressing into late cycle stages, Mark Holman presents his expectations from the Fed going into the second half of the year and explains why he believes Treasuries can provide the protection investors may need.

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.

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

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.

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.

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.