TwentyFour

It’s been an interesting week for European CLOs; one of our favourite picks in fixed income. 

Credit metrics, as measured by the rating agencies, continued to improve throughout the first half of this year, with all corners of the globe having comfortably more upgrades than downgrades.

The last ten year period has seen supply from various parts of the ABS market ebb and flow.

Today sees the launch of the first dedicated Additional Tier 1 Exchange Traded Fund. As first mover, Invesco Powershares gets to claim the simplest ticker, AT1 LN.

We woke today to the ironic news that on the same morning that Greece struck a deal with Eurozone authorities to ease its repayment obligations, another borrower, who also manged to ease its obligations a few years ago, has now decided to return to the markets with a new issue.

Following central bank commentary and actions has been a really useful source of information in the post global financial crisis world; however, closer to home here in the UK the commentary and the actions have been less consistent than those coming from either the Fed or the ECB.

For many years ABS has primarily been used as a funding tool for banks and other lenders.

In recent weeks we have talked often about the tightening of lending standards, the possibility of the end of dot plots, and especially the shape of the US yield curve – today’s blog encompasses all three.

It seems a long time since the European ABS market saw any meaningful volatility.

Following on from our recent comment on the level of Italian BTPs and how this has a potential to impact the transmission mechanism, it is interesting to note the subtle but important changes that have been applied elsewhere across the global economy.

Nearly 4,000 international ABS market participants attended the Association for Financial Markets in Europe’s Global ABS Conference last week, the biggest attendance since the financial crisis.

Aside from the fact that he is Italian and once served as governor of the Italian central bank there are other reasons why Mario will be concerned at the price action in Italian Government Bonds (BTPs).