Strong Bid For US Rates Despite Higher Breakevens, With a Bull Flattening Curve, And One Full Hike Has Been Priced Out Over Past Week (5.4 Implied By End 2022)

On the Russian front, the Rouble has had the largest percentage drop since the 1998 financial crisis, the government's CDS implied 5Y US$ default probability has surged to 60%, but commodities are doing well (if they can be paid): palladium prices up 5%, European TTF natural gas up 12%, wheat up 10%

Russian Government 5Y USD CDS Implied Default Probability | Source: Refinitiv


Good Rebound In High Yield Today, With Cash Spreads Down 28bp And CDX HY Down 10bp

Mediocre volumes of for the week in the primary US$ bond market, with rates volatility at extreme levels (IFR Markets data): 25 tranches for $18.0bn in IG (2022 YTD $234.1bn vs 2021 YTD $255.4bn) and 1 tranche for $1bn in HY (2022 YTD volume $31.7bn vs 2021 YTD $US$87.9bn)

1-Week Change In US Corporate OAS By Credit Rating | Sources: ϕpost, FactSet data


The S&P 500 Was Up 0.8% This Week, Led By Healthcare, Utilities, Real Estate Sectors

Volatility shot up mid-week but dropped back into the weekend, as S&P 500 growth stocks rose 4.8% and value stocks 2.8% over the last couple of days

YTD Total Returns by Country | Sources: ϕpost, FactSet data


Rates Sold At The Front End On Friday, With A Slightly Flatter Curve And Lower Breakevens

The risk sentiment shifted today as Putin seemed willing to negotiate with Ukrainians about their future leadership: Russia's 5Y US$ CDS spread was down 355 basis points to a still whopping 497 bp, and the Rouble was up 7.7% from Thursday's lows

5Y US$ CDS Spreads For Russia vs Emerging Markets Sovereigns | Sources: ϕpost, Refinitiv data


Spreads Widen Across The Credit Complex As Macro Risks Dominate All Asset Classes

It was a roller coaster in the market today, with overnight and morning action bringing in a ton of protection buyers, followed by a reversal after Biden's speech and into the close

CDX IG & HY Intraday Today | Source: Credit Suisse


US GDP Data Showed Upward Revision To Price Deflator (+7.1% vs 6.9% est.), Leading To Further Rise In Inflation Breakevens

All eyes were obviously on Ukraine today and the monstrous volatility in Russian-related assets, with the 2-year Rouble benchmark yield jumping to nearly 16% and the Russian government's 5-year US$ CDS bid spread doubling to a new wide of 852 bp

Russia vs US 2Y Treasury Yields | Sources: ϕpost, Refinitiv data


Duration Remains The Main Driver Of Price Action, As IG Spreads Were Close To Unchanged Today

After a hiatus of a couple of weeks, the high yield primary market saw a new offering priced today, with Twitter raising $1bn in a single tranche (8-year non-callable yielding 5%)

US$ Bonds Z-Spread Curves | Sources: ϕpost, Refinitiv data


US Treasury Curve Continues To Bear Flatten, Driven By Higher Inflation Breakevens, As Oil Prices Near $100/BBL

Macro markets have increased the Ukrainian war risk premia over the past 24 hours: the Rouble is down close to 5% as we write, Russia's 5Y US$ CDS spread is up 80.1 basis points to 420 bp (1Y range: 75-420bp), nearly double where it was last week (215bp on 16 Feb.) and yields on local benchmarks are up 120bp across the curve (2Y now at 11.3%vs 10.1% last week)

US 2Y Treasury Yield and Brent Crude Front Month Prices | Source: Refinitiv


Spreads On High Yield CDS Indices At Widest Since 2020, CDX.NA.HY 5Y Now At 375bp

Despite the still considerable level of rates volatility, a handful of US$ IG deals priced today, led by ConocoPhillips' $2.9bn 3-tranche offering

CDX.NA.HY 5Y & iTRAXX EU XOVER 5Y CDS Indices Bid Spreads | Source: Refinitiv


US Rates Sell Off At The Front End, Yield Curve Flattens As Inflation Breakevens Rise

Macro headlines were dominated by the situation in Ukraine, although weak sanctions from the US and Europe indicate that peak fear may be behind us; market impact was mixed with a positive tilt: Russia's sovereign US$ CDS spreads were significantly wider (at 6-year high), but the Rouble was up 1.8%, while commodities like platinum and palladium were down

US Treasury Curve Spreads (basis points) | Sources: ϕpost, Refinitiv data


Same Story Into The Weekend: Wider Spreads Across The Credit Complex, CDX IG Indices At New Highs For The Year

Primary market issuance volumes for the week (IFR data): $31.6bn in 37 tranches for IG (2022 YTD volume $216.0bn vs 2021 YTD $220.8bn) and $0 for HY this week (2022 YTD volume US$30.7bn vs 2021 YTD $77.4bn)

US Corporate Net Margins May Have Peaked | Source: Credit Suisse


Another Week Of Losses Across Most Equity Markets, With The US Down 1.7%, While Mainland China Rebounded 2.5%

David Kostin, US equity strategist at Goldman Sachs, recently downgraded his forecast for the S&P 500 at the end of the year to 4,900 (from 5,100), a potential upside of about 13% from where we stand today; he views returns this year as solely driven by earnings growth, with multiples coming down

Year-To-Date Total Returns By Country | Sources: ϕpost, FactSet data