This week, the ECB meeting is likely to share attention with the US inflation data for March. The path and timing of interest rate cuts currently seems much clearer in Europe than in the US. Despite the continued positive issuance environment and robust spread environment, issuance volumes were rather disappointing in the previous week and are likely to remain subdued this week. Markets are likely to open today at the previous week's level with no clear direction. |
The ECB's upcoming "interest rate turnaround" is fueling the credit market and the renewed "search for yield". This is leaving its mark on the EUR credit primary market, where issues continue to be met with solid investor demand and new issue premiums continue to narrow. The secondary market was brought back to central bank reality and the re-pricing of the government bond curve resulted in meagre or even negative total returns. The first interest rate cuts by the central banks (ECB & Fed), which are now within reach, could give the credit market a slight boost, allowing investors to lock in the current yield and spread levels. Conversely, this should also lead to slightly tighter risk premiums in the short term before credit risk comes to the fore again at the end of H2 24. |
While the EUR primary market continues to have a lot to offer from an analyst's point of view - yesterday especially thanks to the corporate bond sector - the secondary market is meanwhile lacking in events which makes it difficult for an analyst to report. As a result, attention is currently turning to Japan, one of the most boring markets of the last few decades, which has seen significant movement. The market start today is likely to be subdued. |
Little new on the fixed income market. Once again, the market is revising its interest rate cut fantasy downwards (this time due to US inflation data), while investor demand remains high on the primary market, with long maturities and higher-yielding issues (subordinated, HY, etc.) in favour. While government bond yields widened in the previous week, the spread rally on the credit market continued undisturbed. We also expect a "risk-on" sentiment on the EUR credit market and solid primary market activity this week. The signs point to a supportive market start to the trading week. |
This months publication is all about green bonds vs SLBs. The former are increasingly holding their ground against SLBs, which is reflected not only in the record-breaking EUR primary market volumes, but also in investor demand and therefore in pricing. This trend can also be seen outside the public debt capital market in the SLL segment. Meanwhile, the ESG segment as a whole is facing increasingly more headwinds in the US. |