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USD HY Overperformed IG This Week, As Spreads Tightened While Duration Sold Off

A decent week for USD bond issuance: 45 tranches for $36.085bn in IG (2023 YTD volume $968.309bn vs 2022 YTD $1.008trn), 14 tranches for $9.15bn (2023 YTD volume $121.297bn vs 2022 YTD $80.376bn)

Brazil and Mexico 5Y USD CDS Mid Spreads | Source: Refintiv


Sideways Price Action For US Equities This Week, Dragged Down By Technology Stocks

Chinese equities saw a slight rebound (US$ total returns), although the real estate sector continues to underperform, with enduring concerns about possible LGFV defaults

Chinese Equities Over The Past Week | Sources:, FactSet data


Modest Sell-Off At The Long End, With The US Curve Steepening, Driven By Real Rates

The September FOMC decision not to hike is well-telegraphed, but it will be interesting to see what the Fed's latest economic projections and dot plot show, as the strength of the recent data continues to justify one more hike

Convergence of USD vs EUR 1Y Forward inversion In 1Y Swap Rates | Sources:, Refintiv data


Losses Across The US Credit Complex, With Modest Spread Widening Amplifying The Move In Rates

High-quality bond issuance jumped this week as corporates are back to work: 74 tranches for $57.53bn in IG (2023 YTD volume $932.224bn vs 2022 YTD $988.591bn), 3 tranches for $815m in HY (2023 YTD volume $112.147bn vs 2022 YTD $78.876bn)

Altice Finco SNRFOR Mid Spread (bp) | Source: Refinitiv


Pretty Grim Week For Global Equities: US Total Return -1.5%, China -2.0%, EZ -2.2%

The rise in real yields mixed with an economic slowdown and tension between the US and China around technology have been driving valuations lower: the NTM P/E of Eurozone stocks is now back around 12x

Global NTM P/E Multiples | Source: FactSet


Rates Sold Off This Week, With The OPEC Decision Adding Some Pressure To The Front-End Of The Inflation Curve

The main driver of the recent moves in US rates has been the robustness of US economic growth, pushing up 1y forward 1y and repricing the belly of the curve towards a higher neutral rate

1y forward 1y USD OIS | Source: Refinitiv


High Yield USD Cash Credit Has Outperformed Equities Over The Month Of August On A Vol Adjusted Basis

Very little activity in the USD primary bond market this week: 4 tranches for $3.45bn in IG (2023 YTD volume $873.694bn vs 2022 YTD $936.09bn), no new issue in HY (2023 YTD volume $111.332bn vs 2022 YTD $77.37)

Ratio of S&P 500 to iBOXX USD HY | Source: Refinitiv


Decent Rebound For US Equities This Week, With Healthier Hedge Fund Positioning Helping

The divergence in the macro outlook of major economic areas has become more apparent, and was reflected in the poor performance of Chinese and European equities over the past week

S&P 100 Market Cap (USD m) | Sources:, Refinitiv data


US Yield Curve Twist Flattens As The Fed Seems To Maintain A Hawkish Bias At Jackson Hole

Although Powell strategically skirted around the neutral rate question, the policy focus in the US is to prevent the risk of a possible reacceleration of inflation, as the macro picture is still much healthier than in Europe or China

US 6-month CPI swap spot vs 5y forward | Sources:, Refinitiv data


Broad Widening In Credit Spreads, HY-IG Decompression As Risk Markets Take A Breather

Healthy issuance volumes of USD corporate bonds this week: 44 tranches for $34.6bn in IG (2023 YTD volume $820.91bn vs 2022 YTD $881.941bn), and 5 tranches for $2.995bn in HY (2023 YTD volume $102.907bn vs 2022 YTD $71.301bn)

CDX EM 5Y Mid Spread (bp) | Sources:, Refinitiv data


Stretched Sentiment And Positioning, Lower Summer Liquidity, Facilitate Short-Term Consolidation

The low level of realized (and implied) volatility this year can largely be explained by the rise in dispersion (fall of correlation) of performance across single stocks and sectors

S&P 500 Price Index & 1M ATM Implied Volatility | Source: Refinitiv


Duration Sold Off This Week, With 30Y Bond Yields Touching 4.3% For The First Time In 2023

The US economy has been able to withstand Fed hikes much better than anticipated, causing multiple investment banks to abandon their calls for a recession this year, and putting pressure on the level of the real neutral rate

Weekly Change In the US Treasury Yield Curve (bp) | Sources:, Refinitiv data


Spread Compression Across The Credit Complex, Led By The Riskiest Assets Classes

Limited supply of new corporate bonds this week: 18 tranches for $15.65bn in IG (2023 YTD volume $786.310bn vs 2022 YTD $824.091bn), 4 tranches for $2.61bn in HY (2023 YTD volume $99.952bn vs 2022 YTD $68.576bn)

1-Month Total Returns for ICE BofA US Corporate indices | Sources:, Refinitiv data


Although Momentum Remains Strong, The Performance Of US Tech Is Unlikely To Be Repeated in 2H23

At current levels, with the S&P 500 Technology sector up 46% YTD, a couple of things make sense: 1) hedging US equities with cheap gamma; 2) look for a continuation of the cycle in EM stocks that have underperformed (Chinese ADRs for example)

Implied volatility of a 1-year 10-delta put on the S&P 500 | Source: Refinitiv


Strong US Macro Data Leads To Higher-For-Longer Shift In Forward Curve, With Fewer Cuts Priced In 2024

The low implied rates for the September and November FOMCs make sense (no clear asymmetry), as the inflation path is likely to stay favorable for the remainder of the year, putting little pressure on the Fed to tighten further

US rates vs equities implied volatility | Source: Refinitiv


USD Credit Largely Unchanged This Week, With Slight HY-IG Spread Decompression

USD corporate bond issuance reopens with 2Q23 earnings season: 25 tranches for $30.575bn in IG this week (2023 YTD volume $770.66bn vs 2022 YTD $805.491bn, -4.3% YoY), 6 tranches for $2.835bn in HY (2023 YTD volume $97.342bn vs 2022 YTD $68.576bn, +41.9% YoY)

IBOXX USD Liquid Bonds HY vs CDX HY 5Y | Source: Refinitiv


July Performance Unfazed Despite Mediocre Earnings So Far, Bolstered by Increase In Net Length From Fast Money Community

Though current levels of valuation for US equities look high, with the forward P/E on the S&P 500 close to 20, they are actually at a more reasonable 17 when you exclude the "magnificent seven" stocks (collectively trading at 32x)

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


Well-Telegraphed 25bp Hike Will Surprise No One, But The Fed Is Likely To Highlight Strength In US Data

In the triple whopper of monetary decisions macro markets will have to digest this week, the BoJ is probably the most interesting, as even a baby step towards ending YCC would have huge repercussions across the complex

Current FOMC Pricing | Sources:, Refinitiv data