TwentyFour

US corporate bond primary markets have had a robust start to the year as both Investment Grade (IG) and High Yield (HY) companies have looked to take advantage of the recent rally in rates and spreads that we have experienced since Fed Chairman Powell's December FOMC comments up until his more cautious stance in the January meeting.

Next week markets will receive January Consumer Price Index (CPI) inflation prints from the US and the UK, which will no doubt be widely followed. In the US, the Bloomberg consensus is for a significant drop in headline CPI from 3.4% to 2.9%, while core is expected to decline by a less spectacular 20 bps from 3.9% to 3.7%. For the UK, consensus is for a small increase in CPI inflation from 4.0% to 4.1%.

In this Back to Basics webinar, Aza Teeuwen (Partner, Co-Head of ABS) and Douglas Charleston, (Partner, Co-Head of ABS) provided a comprehensive understanding of the key aspects and trends within the European RMBS market.

A few weeks ago, JP Morgan skipped a call on one of its $1,000 par preference shares (“US Prefs”). The perpetual notes had a coupon of 6.75% payable until Jan’24, with a subsequent reset of 3-month SOFR + 404bps. Post the non-call, the coupon changed to 9.35% and will continue to reset every 3 months.

Yesterday was an eventful day for markets. We started off with inflation data in Europe, followed by an earnings release by New York Community Bank that showed large provisions in their commercial real estate loan book, before moving onto the Fed’s Federal Open Market Committee meeting

Low interest rates feel like a lifetime ago, but it was only in June 2022 that the Bank of England increased the base rate to 1.25%, the first time it moved above 0.75% since March 2009.

The long-awaited Personal Income and Outlays report for December was released last Friday. This piece produced by the U.S.’ Bureau of Economic Analysis contains information about personal income, savings rates and very importantly the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge of the economy.

Aza Teeuwen reflects on a busy quarter for the Asset-Backed Securities team, highlighting the primary deals and trading that occurred all the way through the quarter until the end of December, the performance of ABS for the quarter, and his confidence that ABS is in a good position to carry its strong momentum into 2024.

Dillon Lancaster provides an update on the recent events which occurred during Q4 2023, highlighting the volatility in the treasury market which dominated the beginning of the fourth quarter, and the turnaround in November, which saw US inflation fall below expectations and labour data weaken.

After a tumultuous year for fixed income, government bond markets were finally delivering a story of falling inflation in Q4 2023. In our Investment Grade quarterly update, Gordon Shannon reflects on Q4, and in particular the month of December which proved to be one of the strongest months of the year, as hopes of multiple rate cuts in 2024 were accelerated.

The minutes to December’s Federal Open Market Committee (FOMC) meeting were released earlier this month and provided some interesting insights on the potential path for quantitative tightening in 2024, with several participants ultimately recommending slowing the pace of quantitative tightening (QT), which is running at $95bn, to zero.

UK banks will start reporting fourth-quarter 2023 earnings only in about a month or so, which feels like an eternity for eager bank analysts. Fortunately, the Bank of England published two interesting reports last week that offer a useful and insightful preview into last quarter’s key lending, asset quality and funding trends.