Europe

Markets opened today to the news that German Chancellor, Angela Merkel, and French President, Emmanuel Macron, had reached an agreement to support the launch of a €500bn support package to aid the European Union’s recovery from the coronavirus outbreak, which has devastated large parts of the continent.

One of the big support mechanisms for the UK economy during this pandemic has been the availability of grants and corporate loans via the banking system, aided by unlimited liquidity from the central bank.

Although we are very much still in the grip of COVID-19’s impact, it has now been a month since the equity market’s trough and now would seem an opportune time to dissect some of the price action that preceded the unparalleled market turmoil in March.

Partner and Portfolio Manager Ben Hayward provides an update on the European ABS market.

We noted with interest two headlines yesterday: Italy to suspend mortgage payments amid outbreak and RBS and NatWest offer mortgage breaks for customers affected by coronavirus

Our take on all of this is that the central bank has acted in a very targeted and timely way, adding large volumes of liquidity at even lower rates, along with significant capital to the banking system.

This deal may well perform in the short-term, and we sincerely hope Alpha’s plan works, but we also recognise there is a high degree of execution risk and the domestic economy still has considerable headwinds.

Chris Bowie discusses “The Opportunities in Sterling Credit” as he goes into some of the myths and opportunities within the sterling credit markets and trends we expect for the year ahead.

Kicking off the new year, we expected the new issue market to be very active and we certainly haven’t been disappointed, with the good momentum created at the end of last year – thanks to the US and China reaching a ‘phase one’ agreement and the resounding victory by the Conservatives paving the way for Brexit negotiations to move forward – allowing pent-up borrowing demand to hit the market.

"In some parts of the global economy, we might be seeing a bottom in terms of low activity levels." TwentyFour's Felipe Villarroel discusses the factors behind these improving trends.

"Younited’s funding strategy is as innovative as its business model... In May this year, the company successfully issued its first #ABS backed by French consumer loans" TwentyFour's Ben Hayward discusses.

When Mario Draghi unveiled the European Central Bank’s latest stimulus package earlier this month, the restarting of quantitative easing with €20bn per month of government bond purchases took most of the headlines.