TwentyFour Blog

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%.

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.

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.

Within the European ABS landscape, Volkswagen Leasing has solidified its role as a benchmark issuer under the Volkswagen Compartment Leasing (VCL) platform. Volkswagen uses this platform – with over 25 years of history – to finance standard German auto loans. It is probably one of the least exciting platforms but also one of the most liquid ABS investments you can buy.

The worsening US consumer credit data has largely fallen under radar. A few weeks ago, November 2023 data came in at $23.8bn representing a substantial increase from October’s $5.77bn and September’s $10.9bn.

Federal Reserve Governor Christopher Waller gave a speech on November 28 titled: “Something Appears to Be Giving”, where he laid out the reasons why he is becoming more confident of the Fed’s ability to bring inflation down to its 2% target. 

With most central banks presumably at highs in terms of monetary policy rates during the current cycle, the focus has rightly shifted to the timing of the first cut.