Spreads Mixed This Week In The US Credit Complex, With Cash Outperforming Synthetics

Fairly quiet week of USD corporate bond issuance (IFR data): 17 tranches for US$12.8bn in IG (2023 YTD volume US$728bn vs 2022 YTD US$750bn), none in HY(2023 YTD volume US$94bn vs 2022 YTD US$68bn)

CDX HY 5Y Mid Spread vs Bloomberg US HY OAS | Sources:, Refinitiv, FactSet data


Risks Of Higher-For-Longer Fed Policy Took US Equities Lower For The Week After Solid Gains In June

The skew in the implied volatility of S&P 500 options is close to neutral, and the aggregated positioning of hedge funds is still prudent (very low long/short ratios) heading into earnings season, possibly setting up US stocks for further gains

USD Total Returns YTD | Sources:, FactSet data


Fairly Volatile Week In US Rates, With Squeezy Moves Higher In Yields On Mostly Stronger Data

Recession pricing has been taken down, with a marked steepening in the USD forward curve: 3M SOFR 3 years forward rising by over 30bp over the week. The peak FF rate is not moving higher but the magnitude of the subsequent easing has been significantly marked down

Implied yields on 3M SOFR Futures | Sources:, Refinitiv data


Continued Spread Tightening Across The USD Credit Complex, As Distressed Bonds Total Returns Near 12% YTD

Pretty quiet week for USD corporate bond issuance: 13 tranches for $10.395bn in IG (2023 YTD volume $683.385bn vs 2022 YTD $716.791bn), and just 2 tranches for $895m in HY (2023 YTD volume $86.537bn vs 2022 YTD $67.366bn)

Modified Duration of ICE  BofA US Corporate Indices | Sources:, Refinitiv data


US Equities Keep Rising With Improved Breadth, Though Some Tactical Signals Point To Froth

Easy to overlook after months of underperformance, Chinese equities have done well over the past week, generating US$ total returns of 4.3% (vs 2.6% for US equities)

FactSet US vs China USD Total Returns Over The Past 3 Years | Source: FactSet


The Fed's Current Plan Is To Hike In July, Skip September, And Announce A Pause In November

The FOMC decision on Wednesday confused the market, with the hawkish messaging largely ignored to focus on the decision not to hike in June despite strong recent data

1M OIS Forward Rates Curves | Sources:, Refinitiv data


Lower Odds Of US Recession / Credit Crunch Continue To Support Spread Compression In High Yield

A good rebound in issuance volumes of US$ corporate bonds this week: 57 tranches for $48.45bn in IG (2023 YTD volume $672.99bn vs 2022 YTD $716.791bn), 4 tranches for $4.325bn in HY (2023 YTD volume $85.642.6bn vs 2022 YTD $66.071bn)

CDS Indices Implied Default Probabilities | Sources:, Refinitiv data


US Equities Continue To Rise, Now Led By Small Caps (up 6.7% MTD vs 2.9% for the S&P 500)

The extreme concentration of index returns around technology stocks is starting to broaden out, which should keep the rally intact for a while in the absence of a clear catalyst for a correction

S&P 600 Small Caps vs Nasdaq 100 Relative Performance | Source: Refinitiv


The FOMC This Week Should Show A Patient Fed, Willing To Wait Until July For The Next Hike

US economic data has been consistently better than expected, and so far the credit impact from the regional financial crisis has been mininal, but Fed's leaders have expressed a desire to wait for more clarity before hiking further

1M USD OIS Forward Rates | Sources:, Refinitiv data


Decent Price Action In US Credit This Week Despite Duration Sell-Off, With Spreads Slightly Tighter

Modest amount of corporate bond issuance in the past week: 17 tranches for $14.45bn in IG (2023 YTD volume $610.04bn vs 2022 YTD $652.141bn), 9 tranches for $5.1bn (2023 YTD volume $80.692.6bn vs 2022 YTD $56.371bn)

ICE BofA Indices OAS Ratios | Sources:, Refinitiv data


US Equities Have Terrible Breadth: NDX Up 8% Month-To-Date, Equal-Weighted S&P 500 Down 3%

Active managers are still very lightly positioned, which could lead to further gains in the short term, with continued strength in economic data and a new debt ceiling deal

FTSE Global 100 Constituents, Market Cap in US$ bn | Sources:, Refinitiv data


Sizable Bear Flattening Of US Yield Curve Over The Past Week, As Economic Data Surprises To The Upside

Against market expectations (based on the Fed's dovish forward guidance), the June FOMC is back in play, with about 2/3 chance of a 25bp hike now priced in

Weekly Changes in CitiFX Economic Surprise Indices | Sources:, Refinitiv data