Government Debt Has Exploded. Does It Matter?
Given most countries are going through the same issues and their fiscal expansions are justified, the relative value has not changed that much.
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TwentyFour Blog
The US Bond Market Recovery has also Outpaced Equities…with a Twist
Yesterday we showed that for European investors, what we speculated on back in March has come true; that the bond market did recover its losses far more quickly than equities, as shown below.
Ratings Migration Pointing to Lower Defaults
A trend of negative ratings migration has historically been a consistent precursor for a pick up in the default rate of publicly rated debt.
The Bond Market Recovery has Outpaced Equities
The clear opportunity within IG credit from our perspective, without having to take excessive risk, is to buy legacy Bank and Insurance IG debt.
Starved of Income
With BP slashing its dividend this week, we have now seen 52 of the FTSE 100 companies suspend or cut their dividends this year.
Optimism from the FPC
As expected the Monetary Policy Committee (MPC) kept UK base rates at 0.1% and maintained their current level STG IG corporate bond on the BoE balance sheet at £745bn, with no immediate expectations of a need for further stimulus.
Are Banks Becoming Less Cyclical?
This week we are right in the middle of the European banks’ Q2 reporting period. Today for example we had results from a diverse group of Europe-listed banks, with Credit Suisse, BBVA, Lloyds and Standard Chartered all reporting. All have very different business models and footprints across varying geographies.
Coventry Enters RMBS Premier League
Coventry Building Society today priced a well-received £350m 2.5 year UK RMBS deal, and by using a Master Trust style structure (historically the preserve of only the largest UK banks) the issuer has beaten its own path to joining the big leagues of RMBS.
UK Credit Can Benefit From ‘Japanification’
As more government bond curves around the world join the select group trading at negative yields, we are seeing a spike in ‘Japanification’ headlines in the press.
Diverging Defaults and Cyclical Selections
Earlier this week, Moody’s published its default study for June, which showed that as expected, default rates globally have started to pick up as a result of COVID-19. The trailing 12-month global high yield default rate reached 5.4% at the end of June, up from 4.8% in May, as the gap to the long term average of 4.1% continues to grow.
Q2 Earnings Could Boost Outlook for Credit
As we enter Q2 earnings season, we will be most interested to learn how Corporate America has fared over the past three months.
Companies Unlikely to Underperform in Q2 Earnings
Ultimately, while Q2 will be a bad quarter for many companies even if they outperform expectations, in our view it is not the real driver of spreads at this stage.