Credit

Move To Quality In USD Credit Pushes HY Spreads Wider, IG Spreads Tighter

More modest levels of USD bond issuance this week: 21 tranches for $16.65bn in IG (2023 YTD volume $984.959bn vs 2022 YTD $1.014trn), 12 tranches for $8.333bn in HY (2023 YTD volume $129.631bn vs 2022 YTD $86.376bn)

Equities

Equities Have A Rough Week, As Real Yields Rise Without Any Positive Revision To Growth Expectations

The rise of oil prices has raised concerns about the continuing health of the US consumer sector, and this theme was really top of mind this week, with consumer staples overperforming and consumer discretionary underperforming

Rates

Hawkish FOMC Leads To Repricing Higher In USD Curves, Forward Inversion Still High Compared To Fed Forecasts

The market is currently giving roughly equal probability to a Fed hike in November and in December, but the former sounds increasingly unlikely if the Federal government shuts down for weeks in October

Credit

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)

Equities

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

Rates

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

Credit

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)

Equities

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

Rates

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

Credit

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)

Equities

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

Rates

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

Credit

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)

Equities

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

Rates

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

Credit

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)

Equities

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)

Rates

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

Credit

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)

Equities

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)

Rates

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