Rates
US Rates Rise, With Lower Inflation Breakevens And Higher TIPS Real Yields; Volatility Close To Highest Level This Year
Today saw a decent rebound in the TIPS 5s30s spread, an indicator of forward economic growth expectations, after a big drop last week; it's not necessarily sustainable though, as the Fed might come closer to the GS view of 3 rate hikes in 2022 in its new economic projections / dot plot next week
Credit
US Corporate Bonds Rose To End The Week, Mostly Helped By The Move Lower In Rates
Total volumes of issuance for US corporate bonds this week (IFR Markets data): US$400m in a single tranche for HY, US$29.0bn in 40 Tranches for IG
Equities
Mixed Day For US Equities, With Declines Led By The Technology And Consumer Discretionary Sectors
Volatility weighed on issuance this week, with very little ECM activity: $2.1bn of SPAC IPOs, $1.7bn in Accelerated Book Building / Blocks, $500m of Follow-Ons, $800m of Convertibles, $157m in international deals (IFR Markets data)
Commodities
Terrible Week For Major Commodities, With Large Losses Throughout The Complex
Crude oil and natural gas prices were mostly driven by Putin's efforts to gain acceptance for Nord Stream 2: he favored increasing OPEC+ supply further to please Washington, though the group left the meeting unadjourned with no changes to their existing agreement
FX
Volatile Week For Currencies Ends On A Quieter Note, With The Dollar Index Edging Up On Friday
The past week has been a good example of how carry trades have a negative convexity to volatility, while funding currencies like the Japanese Yen and Swiss Franc have a positive convexity (rising the most when volatility is highest)
Rates
US Rates Drop, Mostly From The Belly Out, On Disappointing Private Payrolls (235K vs 530K Expected)
The ISM Services was very strong, which (coupled with the weak NFP) points to higher wage growth and more price increases, keeping short-term rate hikes expectations relatively unchanged
Credit
Mixed Day For US Credit, With Cash Spreads Seeing Modest Widening In IG, Tightening In HY
In the primary bond market, Daimler Trucks Finance painted the curve out to 10 years in the largest offering today, raising US$ 6bn in 8 tranches
Equities
Broad, Solid Rebound In US Equities, With 91% Of S&P 500 Constituents Closing Up
All sectors rose today, led by industrials and energy stocks; value and small-cap stocks overperformed widely growth and large caps after underperforming over the past week
FX
Not A Great Deal Of Movement For The US Dollar Index Today, With Slight Weakening In The EUR And JPY
Emerging market currencies rebounded today with the risk-on sentiment, lower sovereign credit spreads and a bounce in commodities; the notable exception was the Turkish Lira, which fell hard again, now just below the 14.00 level
Rates
Big Rise In US Rates At The Front End Out To The Belly, With Further 5s10s Flattening
For the first time today, the implied yield in December 2025 eurodollar futures (ED) is lower than December 2024 ED, meaning the market sees a short and shallow hiking cycle till 2024 followed by a possible policy reversal starting in 2025
Credit
Decent December Start For US Credit, With Tighter HY Cash Spreads And Lower Long-Term Rates Helping IG
After days of forced idleness, the primary corporate bond market came back to life today, with a number of large prints, led by Goldman Sachs' US$ 3.25bn offering in 3 tranches and T-Mobile's $ 3bn in 3 tranches
Equities
US Stocks Opened Higher, Turned Around Midday And Fell Hard Into The Close
Some reported that an omicron case in California was the cause of the slide, but it sounds like a weak explanation at best; fund managers are more likely to be booking some gains to crystallize the solid YTD performance in US equities
