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Broad Widening In Spreads Across The US Credit Complex, With IG Overperforming On Duration Bid

USD IG bond issuance continued at a fast clip this week: 53 tranches for $39.275bn in IG (2023 YTD volume $354.665bn vs 2022 YTD $361.14bn), no new issuance in HY (2023 YTD volume $39.575bn vs 2022 YTD $34.076bn)

EU vs US 10Y Investment Grade CDS Indices Mid Spreads | Source: Refinitiv


US Equities Had A Difficult Week As Powell And Regional Financials Provide One-Two Punch

The speed at which things got out of hand with SVB is the worry for US regional banks, with short-term implied volatility on financials getting a little panicky while the broader market stays relatively calm

XLF 1-Week / 3-Month Implied Volatility Spread | Source: Refinitiv


The US Yield Curve Bull Flattened For The Week, Driven By Much Lower Inflation Breakevens

The market fright around Western regional banks impacted mostly equities, but did cause a jolt to money markets: basis swaps were extremely tight on Tuesday and got wider into the weekend, though nothing to worry about for the moment

1Y 3M BSBY - 3M SOFR OIS Basis Swap | Source: Refinitiv


Tighter Spreads Across The USD Credit Complex, Led By Single Bs, As BBs Continued To Underperform

Strong volumes of issuance this week (IFR Markets data): 66 tranches for $48.09bn in IG (2023 YTD volume $315.69bn vs 2022 YTD $287.841bn), 11 tranches for $7bn in HY (2023 YTD volume $39.575bn vs 2022 YTD $33.875bn)

Heaviest February USD IG issuance ever | Source: Credit Suisse


Broad Rebound For US Equities This Week, Though S&P 500 Ends February Down 2.6%

The story of equities so far this year has been one of resilient revenue, declining margins and expanding valuations on the back of more positive than expected growth; as such, the greatest risk to the market remains that of recession and growth downgrades

US Equity Risk Premium | Sources:, Refinitiv & FactSet data


US Inflation Expectations Rose Further This Week, With 1Y TIPS Breakeven Now Up 200bp Since Early January

The front end of the curve continues to lead the action, as the market stays focused on very short-term event risk: Powell's appearance before the Senate this week and the latest employment report coming on Friday

US TIPS Inflation Breakevens | Sources:, Refinitiv data


Dealer Inventory For USD HY Bonds Estimated To Be At 12-Month High, While The CDS-Cash Basis Widened This Week

Investors' appetite for high grade USD corporate bonds remains undiminished for now: 29 tranches for US$22.525bn in IG this week (2023 YTD volume US$267.3bn vs 2022 YTD US$234.091bn), 1 tranche for US$1.1bn in HY (2023 YTD volume US$32.757bn vs 2022 YTD US$31.686bn)

ICE BofA US HY vs CDX NA HY 5Y | Source: Refinitiv


US Valuations Have Come Down Somewhat With Higher Rates, But The Equity Risk Premium Remains Low

In the absence of pressure on risk premia, the story of equities this month has been entirely driven by a shift in the economic narrative, with investors wondering how high rates will need to go for the Fed to achieve a landing

FTSE Global 100 Index | Sources:, Refinitiv data


The Front End Rates Selloff Continues: Peak Fed Funds Rate Now Above 5.40%, As June FOMC Fully In Play

If confirmed over the coming weeks, the positive recent data in the US could put the Fed in a difficult position at the March FOMC, with the soft-landing scenario becoming increasingly challenged by a more hawkish outlook

1-Month Change In CitiFX Economic Surprise Indices | Sources:, Refinitiv data


With Default Rates Still At Very Low Levels, Distressed USD HY Is Overperforming US Equities YTD

A strong week for investment grade USD bond issuance: 42 tranches for $54.175bn in IG (2023 YTD volume $245.075bn vs 2022 YTD $216.041bn), no new issuance in HY (2023 YTD volume $31.475bn vs 2022 YTD $30.686bn)

USD Loans Defaults | Source: Credit Suisse


US Equities Fairly Resilient Through Recent Rates Repricing, But Hard To See A Lot Of Upside Given Current Valuations

Despite the tremendous rebound in Chinese equities since October, the valuation levels remain reasonable compared to US and European large-cap equivalents

Forward P/E Multiples in US, Chinese, European Equities | Source: FactSet


US Rates Sell Off Across The Curve, Led By The Front End, Driven By A Repricing Of Short-Term Inflation Expectations

The recent US activity data has been strong, and core inflation has been coming down very slowly, pointing to a possible reacceleration of inflation: the risk of overtightening has come down and the risk of not doing enough has gone up

US TIPS Inflation Breakevens | Sources:, Refinitiv data


Despite Broadly Wider Spreads, The Compression In US High Yield Continues With CCC-BB Back To August Level

After a good week, YTD volumes of corporate USD bond issuance are now ahead of last year: 33 tranches for $33.7bn in IG (2023 YTD volume $190.9bn vs 2022 YTD $184.465bn), 12 tranches for $8.425bn in HY (2023 YTD 38 Tranches for $31.475bn vs 2022 YTD $30.686bn)

ICE BofAML US HY CCC - BB Spread | Source: Refinitiv


Derisking Ahead Of Much-Awaited CPI Data After US Equities Start The Year Up 10%

Expectations for FY2023 S&P 500 EPS continue to come down: they were around $250 last year and the median estimate now stands at $227 according to S&P Capital IQ (the consensus still sees around 2.5% EPS growth YoY)

FactSet USA & World Total Returns Indices YTD Performance | Source: FactSet


Sharp Rise In Front-End Rates, Inflation Breakevens And Volatility Ahead Of Upcoming January CPI Report

The rise in implied volatilities reflects diminished comfort about the distribution of inflation / rates outcomes, and we've seen slightly more hedging of the left tail (i.e. lower rates) with the recent reduction in the curve inversion

Overnight SOFR 3M Into 2Y Swaption Implied Volatilities | Sources:, Refinitiv data


Tighter Spreads Across US Credit This Week, With The CDX HY Trailing HY Cash Performance YTD

Another solid week for US$ corporate bond issuance: 24 tranches for $21.05bn in IG (2023 YTD volume $157.2bn vs 2022 YTD $168.89bn), 5 tranches for $7.6bn in HY (2023 YTD volume $23.05bn vs 2022 YTD $27.936bn)

CDX.NA.HY 5Y Bid Spread vs ICE BofAML HY Cash OAS | Source: Refinitiv


Strong NFP Surprise Takes Equities For A Slide Into The Weekend; S&P 500 Still Up 8% YTD

Global equities are off to a spectacular start this year, underpinned by a broadly positive growth outlook and fueled by short covering; estimates of speculative net exposure remain low, meaning that the rally could go on for a while

S&P 1500 Price Performance By Sector YTD | Sources:, Refinitiv data


Sizable Moves In STIR Markets On Friday As Employment Report Blows Past Expectations, Puts >5% Peak Rate Back In Play

We're getting close to peak US rates, with just 45bp of additional hikes priced in forwards, and yet economic performance remains strong, putting in question whether financial conditions are restrictive enough

Disinflationary Narrative Seen In Spot 6-Month US CPI Swap | Sources:, Refinitiv data