Europe

Bloomberg reported on Monday that since the European Central Bank started its Corporate Sector Purchase Program (CSPP) in June 2016, it has purchased €177bn of investment grade rated corporate bonds. Initially, as expected, spreads tightened rapidly, but since the first quarter of 2018, they have been gradually widening back out to pre-CSPP levels.

It is that time of year when we traditionally look ahead to the new year and make predictions on the performance of various asset classes, sectors and industries.

We have been discussing for a while what the quantifiable impacts of Italy’s populist government have been for the country’s economy.

There were sharp declines across global risk assets on Tuesday, led by tech stocks but with barely an asset class left unscathed.

After some very negative research pieces – some almost sensationally so – on the affect the wider Italian Government Bond (BTP) spreads would have on Italian banks, yesterday we got to see the facts from Intesa Sanpaolo when it  reported its  Q3 earnings.

As expected, the EBA 2018 stress tests, which were widely reported on yesterday did not have much of an impact on markets generally, although it’s worth looking at some of the stresses.

At TwentyFour our Italian ABS holdings are fairly moderate, and in general our peripheral ABS exposure has been steadily decreasing for some time. This has nothing to do with credit quality, but everything to do with relative value.

It may come as a surprise to some that the country currently experiencing the fastest pace of monetary tightening across developed nations is in Europe, where the main refinancing rate is well and truly anchored at -0.40%.

This morning we arrived to the news that the Italian government was preparing a budget that had a deficit of 2.4%.

Those of you who have seen or heard one of our presentations will be aware of the significant impact that the FX-basis currently has on our relative value bond selection.

This is a crucial week for Turkey’s economy and the Central Bank of Turkey’s credibility.

Since that first encounter the market has remained a core financing option for banks’ consumer and corporate lending books, but there has always been a degree of innovation around the fringes.