US

So far 2019 has been supportive for risk markets. The Fed appears to have adopted a more passive approach, easing market fears of a potential policy error, and in early January we heard conciliatory rhetoric from the US and China pointing to a workable solution to the trade tariff situation. However, the investor exuberance we saw in January has become noticeably more cautionary this week, as geopolitics have once again heightened uncertainty along with some softer looking economic fundamentals and a rather mixed set of corporate earnings. No surprise, then, that asset prices have undergone a slight correction as we head into the weekend.

The Federal Reserve’s Senior Loan Officer Opinion Survey on Bank Lending Practices – from now on let’s just call it ‘the survey’ – was released last night, and as usual provided us with useful insight. The survey was conducted between December 21 and January 7, and covered 73 US domestic banks and 22 branches of foreign banks.

The fourth quarter of 2018 is starting to look like a distant dream for the US high yield market. In the first three weeks of this year the US HY Index (B1-rated) has produced a year-to-date total return of 3.98%, while the equivalent CCC-rated index has delivered a YTD return of 5.63%.

After a long weekend, US investors came back to a busy primary market. Despite the weaker tone, investment banks announced a handful of new deals, all of which were heavily oversubscribed and from a healthy variety of issuers.

The year 2018 will go down in the history books as one of the most challenging we have faced in recent times, with price action in the fourth quarter being particularly brutal and difficult to respond to. When we wrote our outlook for 2019 at the start of December, we were reasonably cautious and felt it possible that prices could dislocate from fundamentals during the year, if markets started to price in the increasing likelihood of a more meaningful downturn or recession in 2020. We were not expecting this to happen in December, but it did, and it has left investors wondering whether this is the beginning of the end of the cycle, and whether months like December will be commonplace in 2019.

TwentyFour Asset Management, the London-based fixed income boutique, has appointed a Head of US Credit in New York who will lead the firm’s expansion into US markets