All insights
Pass the Baton Mario
The big monetary policy event over the month was the increase of monetary stimulus announced by the ECB after two years of slowly weaning the Eurozone off extremely easy money. At the ECB meeting of Thursday the 7th of March Mario Draghi announced the introduction of new TLTRO (the last round ended in December 2018, so this is TLTRO III) and interest rates guidance was modified for the current levels to remain to the end of 2019 (previously mid 2019). Market consensus is for an even longer pause.
Credit Ratings Migration Favours Europe over US
One of the elements we look at on our dashboard that guides us on the state of the economic cycle is credit rating migration. We look at spread movements too, but rating change gives us another line into the risk that rated entities are taking or are confronted with. While we recognise that rating change is a backward looking indicator, viewed in conjunction with other measures, it is possible to draw some important conclusions.
Technical Factors Drive Weakness in US High Yield
Investors decided fairly early this year that, with the help of a dovish Federal Reserve, the big negative move of Q4 2018 was not signalling the beginning of the end, and was instead a dip to be taken advantage of. The rally since has barely paused for breath, with a sustained and broad-based recovery taking hold.
A Good Price Point For European ABS
We wrote a blog a month ago, “January: the Month of ABS-tinence”, about the level of new issuance in the European ABS market, and the slightly counter-intuitive impact it was having.
BBBs and ‘Fallen Angels’: Hellish Risks or Heavenly Returns?
For fixed income investors, it has been impossible to ignore the proliferation of press coverage about the growth of the triple-B rated corporate bond market, and a coming wave of downgrades for companies rated BBB to high yield, with these ‘fallen angels’ exposing investors to mark-to-market losses at best, and defaults at worst.
Is Europe Bottoming Out?
Investors have rightly been concerned about the coordinated global economic slowdown, but in Europe it has been worse than that with the major economies flirting with recession. Consequently investors have been cautious on European assets, but has this caution now reached its peak?