DAILY CLOSE: Markets look for stronger footing
** New single-currency bond issuance remains elusive but there was plenty going on elsewhere in the broader market place. Starting with equities, there is a broad sense developing (from market movements alone) that the week's early jitters may have been 'marginally' overdone - Stoxx600 and US indices (albeit in early trading at the time of writing) were a sea of green with the former adding over 1.7% and seeing a re-acceleration towards the close of play on Wednesday. That sense of 'overdone' was also evident in government bonds. Looking closer it appears that mid to longer dated bonds are underperforming the front end in yield terms, partially a case of the unwinding of safe haven bets but at the same time keeping one eye on the prospect of near-term rate cuts. The upshot is that 2s10s curves in many jurisdictions are steeper with German and UK both hitting highs not seen since Nov 2022
** A little closer to home for the credit markets the iTraxx indices were tighter on the day with Main trading sub 62 (after a peak in excess of 69 on Monday) and Crossover squeezing to below 325 after a multi-month high at the beginning of the week that saw a spike to 360 as investors sought risk protection
** The VIX softened 18.8% to a 5-day low at 22.49. That compared to a spike as high as 65.73 on Monday
IGM Monthly Reports
** IGM Global Credit Snapshot - July 2024 - Overall European single currency issuance dipped in July in line with summer ‘norms’ but that trend was bucked by the FIG and HY sub-sectors. The YTD total passed through the EUR1tn marker and remains around 10% higher than last year. APAC saw the wind taken out of its sails in the latter half of the month with July’s total of USD24.619bn (incl. Japan) marking a sharp decline from the USD35.384bn seen in June. That said, it was still sufficient for July to record the third highest month of the year so far. IG ex-SSA issuance in the US for July 2024 was USD125.504bn - the second-highest ever for the month, surpassing July 2017's USD120.33bn and coming just behind July 2015's USD128.48bn. The surprisingly large haul brought the year-to-date ex-SSA new issue volume to USD1.009tn, or 23.1% ahead of this time last year
** European SF: July 2024 Supply in Review - July closed with around EUR14.5bn of bonds placed with investors, which was up around 25% on June. Among that total, CLOs and RMBS led the way. CLOs accounted for 22 deals, and 12 of those were new issues (the rest being nine resets and one refi). July's tally of EUR5.2bn took the YTD new issue CLO total to EUR30bn. RMBS sales of around EUR4bn helped the YTD total to nearly EUR35bn and more than double the volume seen at the same stage in 2023. The auto market was more subdued, with just two deals printing
Thursday's primary prospects
At the time of writing, the public pipeline remains empty.
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Wednesday's broader market developments
** EU stocks extended opening gains with financials leading a broad-based rise. Opening stock bid followed a positive Asian handover where Nikkei reversed opening losses after BoJ deputy governor Uchida ruled out further rate increases while markets were “unstable”. Rise in EU stocks also came as Wall Street was heading for a second day of gains. In the rates complex, yields rose, chalked up to a further unwind of haven flows & scaling back of rate cut bets, and also as Germany & UK conducted regular auctions ahead of a 10yr UST sale
** Stoxx600 +1.8% at best, or up to 3.5% off Monday’s low
** Govvies: 2yr & 10yr GER yields rise by up to 5.9bps and 8.8bps. Gilts outperformed
Data:
- CH Exports YoY missed at 7.0% (exp 9.5%, prev 8.6%)
- CH Imports YoY beat at 7.2% (exp 3.2%, prev -2.3%)
- GE Jun Industrial Production MoM beat at 1.4% (exp 1.0%, prev rev to -3.1%)
- GE Jun Exports SA MoM missed at -3.4% (exp -1.5%, prev rev to -3.1%)
- GE Jun Imports SA MoM missed at 0.3% (exp 2.5%, prev rev to -5.5%)
What to watch Thursday - Earnings, jobless claims and a long-dated US bond sale
** Key Data: UK Jul RICS House Price (00:01), JN Jun Trade Balance (00:50), US Aug 3 Initial Jobless Claims (13:30), US Jul 27 Continuing Claims (13:30), US Jun F Wholesale Inventories (15:00)
** Key Events: BOJ Summary of Opinions (00:50), Fed's Barkin speaks (20:00)
** Government Auctions: Japan to sell JPY900bn 30yr bonds (04:35), US to sell USD25bn 30yr bonds (18:00)
** Earnings: 20 Stoxx600 and 16 S&P500 companies release results
All times BST
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