TwentyFour Blog

For the fixed income fanatics amongst us, June was always going to be one for the books with all three of the major central banks meeting, elections, and continued data.

From a US high yield (HY) perspective, the month of May turned out to be one of note – for the first time since December 2022, no US HY defaults were recorded, with not one instance of a bankruptcy filing or a missed interest/principal payment.

Phoenix Group (Phoenix), a UK-based insurer mostly in the savings and pensions business, announced a tender offer at par for up to $500m of its $750m 5.625% RT1 callable in January 2025, and $350m Tier 2 callable in June 2026.

We do not usually comment on press articles, but we were all quite surprised to read a piece on Bloomberg titled “A fragile banking system won’t make Europe stronger”.

When market participants were asked at the end of last year to enumerate the main risks investors would face in 2024, the vast majority of those surveyed counted politics and elections amongst the top factors to consider for the unrewarding task of forecasting total returns for major asset classes over the following twelve months.

In spite of what looks like a quiet week ahead, there are a couple of data releases in the coming days that require close attention, these releases could potentially disturb the fragile calm that we are enjoying in the first trading hours of the week.

The European asset-backed securities (ABS) market saw a record issuance last week with €5bn of primary issuance.

The UK’s Office for National Statistics (ONS) released their monthly inflation report this morning. In spite of April’s numbers showing a marked decrease in most inflation measures, it is fair to say that the report was significantly worse than expectations.

The European Central Bank (ECB) will almost certainly start their rates cutting cycle next month. Supportive inflation data and clear guidance from the governing council has driven market implied probabilities of a June cut to almost 100%, with little in the way to derail that.

The most important event this week is likely to be this Wednesday’s US Consumer Prices Index (CPI) release.

Following an incredible 2023, collateralised loan obligation (CLO) investors are again having a great year with the asset class outperforming the more traditional asset classes.

The first four months of this year have seen €11.6bn in gross Additional Tier 1 (AT1) issuance from European banks, across euros, dollars and sterling markets.