Rates
With A Hike At The May FOMC Now Locked In, June Pricing Drifts Higher On Hawkish Fed Speak
Volatility in US rates remains elevated, especially compared to the depressed level for equities, with considerable uncertainty surrounding the June FOMC hike and possible easing later this year
Credit
Solid Spread Compression Across The US Credit Complex, With Cash CCCs 65bp Tighter This Week
Weekly USD corporate bond issuance on the light side: 16 tranches for $10.95bn in IG (2023 YTD volume $421.29bn vs 2022 YTD $512.391bn, down 18 % YoY), 6 tranches for $3.325bn in HY (2023 YTD volume $51.837bn vs 2022 YTD $48.746bn, up 6%YoY)
Equities
Winning Week For US Equities, With Large Banks Like Citi And JPM Beating EPS Estimates On Strong NII
Rerisking is definitely here, with Europe and EM seeing healthy inflows this week, but net length in US equity portfolios remains muted (hedge funds long/short ratios at multi-year lows)
Rates
Bear Flattening After Busy Week Of US Data, Fed On Course To Raise By 25bp In Two Weeks
The most active debate in rates is the June FOMC, where market pricing has shifted to a small hike (from a hold last week), with the latest CPI print showing further indications of sticky inflation in core services
Credit
Despite The Significant Recent Widening Across The Complex, USD Credit Spreads Are Close To Unchanged YTD
Short week to kick off April after a very slow month of March: 15 tranches for $9.8bn in USD IG (2023 YTD volume $410.34bn vs 2022 YTD $480.291bn) in IG, 7 tranches for $8.337bn in HY (2023 YTD volume $48.512bn vs 2022 YTD $47.611bn)
Equities
4% of S&P 500 Companies Will Report 1Q23 Numbers In The Week Ahead, With EPS Expected To Fall 7% YoY
The compartmentalization of market risks has led to huge differences between the implied volatility of stocks compared to rates: 1Y into 2Y USD OIS swaptions are still around 3 standard deviations richer than 1Y ATM options on the S&P 500
Rates
US Front-End Inversion Deepens As Rates Expectations For May And June FOMCs Firm Up
After a quiet holiday week, it will be interesting to see whether the Treasury market returns to more normal liquidity and pricing, with volumes likely to rise into the latest CPI print on Wednesday
Credit
Strong Rebound In USD HY Credit, Led By BBs Overperformance (OAS -73bp WoW)
Decent week for US$ bond issuance: 39 tranches for $24.825bn in IG (2023 YTD volume $400.54bn vs 2022 YTD $466.941bn), 2 tranches for $600m in HY (2023 YTD volume $40.175bn vs 2022 YTD $41.626bn)
Equities
US Equities End Week Broadly Higher After A Good Squeeze; NDX Now Up 20.5% YTD, Best Quarter Since 2Q20
Despite the dispersion of returns across sectors recently, only 6 names (Microsoft, Apple, Nvidia, Google, Amazon, Meta) added up to 84% of the S&P 500's net market cap change this month ($1.1tn)
Rates
Reversal Of Short-Term Financial Stability Concerns Brought Front End Selloff, Bear Flattening Across US Rates
Most of the move this week can be traced to higher inflation breakevens, which simply reflects unease around the end of the hiking cycle while inflationary pressures are still very sticky
Credit
USD HY-IG Cash Spreads Over 100bp Wider In Past 3 weeks While Synthetics Do Slightly Better
The IG bond primary market reopened in the US this week with 28 Tranches for $21.05bn (2023 YTD volume $375.715bn vs 2022 YTD $430.541bn, down 12.7% YoY), while high yield issuance was nonexistent for the third straight week (2023 YTD volume $39.575bn vs 2022 YTD $38.676bn, up 2% YoY)
Equities
US Equities Rose Again This Week, Helped By A Stabilization Of Regional Financials
Despite the possible reversal of recent bearish positioning, we continue to see a challenged path ahead for US equities, with little upside to earnings and valuations
