All insights

Typically in August, credit liquidity becomes a bit like my lawn this summer: patchy. Over the past few weeks there have been a few stories of large fund groups seeing significant outflows from the asset class, and even of liquidations, which begs the question: what are they selling?

We have had a lot of discussion, both internally and externally, over the last few days around when might be the time to begin adding more risk to portfolios again.

Following on from the release of solid Q2 numbers, and no longer in a closed-period, Barclays were quickly out of the blocks and announced the issue of a new AT1 this morning; a $2bn transaction with initial price talk of 8%.

Now that the summer lull has finally kicked in, it seems an ideal time to review the ABS market so far this year and try to make a prediction for the remainder of 2018.

Whilst no hike from the FOMC was expected overnight, markets are still pricing in an eighth hike in September and a ninth in December, which would take the upper bound of the Fed Funds rate to 2.5%.

It’s been nearly five months since the Italian general elections, with the result and the process of forming a coalition government eventually leading to the steepest selloff in BTPs we’ve seen for a long time, and the spread to bunds touching levels not seen since 2013.