Despite Powell’s hawkish efforts to push back market’s rate-cut expectations and last week’s economic evidence that DM growth is far from falling from a cliff, NFC bonds performed well in secondary – particularly in the US
EUR Index Performance
WoW, EUR IG Ex-Fins BBG index was -2bp (-23bp YtD) vs +7bp for HY Corporates. Once again, relentless bidding for Hybrids (and lack of issuance in subordinated debt) is taking levels to YtD23 tights – opening an opportunity for IG Seniors in our view given lagged performance in comparison. Strong primary markets continued (EUR6.1bn issuance last week) with what seems to be some opportunistic issuer action for deals originally penciled in for early 2024.
USD Index Performance
- WoW, US IG was 7bp tighter, equally driven by financials and non-financials. Long end continued to outperform (3rd straight week), but we note net flows in the belly and front-end improved WoW. Cyclicals played catch up to the IG index this week, led by autos.
- IG Index is sitting at YTD tights (+104bps) and is just 15bps from the “max stimulus / consumption” COVID (2021) trading range. Technical tone has been highly supportive, and there are just 8 windows left this year for primary supply.