TwentyFour Blog

Labour market data in the US was stronger than expected on Friday. US Treasuries reacted accordingly with a 10 bps sell-off with Gilts and Bunds moving in the same direction but in a calmer fashion.

After delivering a stunning 2023, collateralised loan obligations (CLOs) were once again one of the top performers in Q1. That leaves us with the question, where do we go from here?

It has been an eventful few weeks in the European high yield market. After waiting a long time for a bus to come along, three have come along at once.

Quarter ends are always a useful time to take a step back and assess what the main macro drivers during the quarter were, which trades worked and which did not and to refresh macro views for the next period.

Over the course of last week, we saw several headlines around Additional Tier 1s (AT1s). First, the Dutch Finance Ministry indicated it is exploring the possibility of modifying or abolishing the asset class.

We saw a great disparity among strategists in terms of default-rate projections for this year. With the cost for corporates to refinance their debt considerably higher than we saw in 2020 and 2021, and an elevated volume of upcoming maturities, many market participants predicted a default rate markedly higher than what we have seen so far. 

Yesterday’s US CPI report delivered a few interesting numbers but is still consistent with the Fed’s goals and timelines, which should allow it to cut rates in the context of some sort of a soft landing.

The latest US non-farm payroll numbers increased by 275,000 for February (payroll survey) incorporating a two-month payroll revision of -167,000, most likely due to seasonal factors, leaving a net revision of just 108,000 jobs added.

We have had a busy week on the central bank front with the Federal Reserve chair Jerome Powell’s semi-annual testimony to congress on Wednesday before Christine Lagarde took centre stage at the European Central Bank press conference yesterday. 

NN Group, the Dutch insurer, has issued its inaugural €750m Restricted Tier 1 (RT1) deal, which came with a 6.375% coupon and BBB-/BBB rating from S&P/Fitch.

Almost a year ago to the day, we were in the midst of banking sector turmoil, which started off with regional banks in the US and spilled over to Europe, eventually culminating in the forced merger between Swiss banks UBS and Credit Suisse.  

Much like the European market, Australian ABS has started 2024 with considerable momentum, with over AU$12bn in issuance year-to-date and a significant pipeline building. But how are its green credentials?