Credit Market Daily #44


Good Afternoon!

A short piece today.

This week will be dominated by the FED and the BoE, with earnings aplenty to provide a interesting backdrop.

The market will be looking for signs of a pause in the cadence of hikes.

This mornings 10.7% Euro zone CPI print will complicate things for the ECB. Lagarde is due to speak again this week and no-doubt clarify her remarks last week in the context of the new data.


High Yield

High Yield cash had a flattish day on Friday after the higher than expected German CPI print of 10.4% compounded the high CPI prints from Italy and France, (likely compounded with this morning’s Euro zone print).

The relatively low total return of +20bps in European High Yield belied a strong spread performance with the index -14bps tighter on the day (Z+594).

Sterling High Yield returned +24bps on Friday, the majority of that being delivered via a -7bp move in spreads to z+763.

The USD High Yield Index outperformed both its European and GBP counterparts both in total returns +50bps and credit spreads, which were -22bps tighter to Z+472bps

This mirrored the relatively strong equity performance of the US over Europe.

Xover is -2bps tighter today at 544, on the back of being -4bps tighter on Friday as we wait for the US to open.

Leaders and Laggers

Virgin media bonds rallied on news that they were dropping the bid for Talk Talk and therefore would not be taking additional debt on to finance the deal.

Investment Grade

Investment grade’s performance on Friday was driven predominantly by rates which saw yields higher across the board.

Credit performance was better with European Investment Grade -2bps tighter (z+222bps), GBP IG -1bp (Z+229bps) and USD Investment Grade -3bps to Z+158bps.

The Main CDS index was -1bp tighter on Friday and is currently trading an additional -1bp tighter at 111.3bps.


Friday’s and today’s inflation prints undid the initial “dovish” pivot moves that appeared to be in the offing and underlined the challenge that the ECB faces in terms of reigning inflation in.

Today has seen Gilts around +6bps in the front end, +3bps in the belly and +5bps in the long end.

German Bunds are steepening today with the front-end tighter and the long end wider, whilst US treasuries are flattening ahead of the FED meeting on Tuesday.

10-year Treasuries, Gilts and Bunds Yield 4.4bps, 348bps and 210bps respectively.


European Equities are currently waiting to take the lead from the US which enjoyed a large rally on Friday driven by hopes of a FED pause.

Today’s Events

Eco Data

Eurozone CPI came in at +10.7% YoY vs. 10.3% expected and +1.5% MoM vs. 1.2% expected, we also had a relatively strong GDP estimate for of +0.2% for the quarter vs.+0.1% expected.

Today’s Reporting
Good Year
XPO logistics

What Has Caught Our Eye

Bloomberg – “UK Starts to Feel the Pinch From Biggest Rate Rises in 33 Years”

This article from Bloomberg provides a great summary of the UK’s current financial health and the opportunities and struggles the country faces (mainly struggles, tbh) in the coming months.

“In the first six months of the fiscal year, the Treasury saw its debt-interest bill jump by 64% from a year earlier to £57.1 billion — significantly more than the country’s fiscal watchdog predicted in March….On current trends, the deficit for 2022-23 as a whole could reach as much as £170 billion, almost double the £99 billion predicted by the Office for Budget Responsibility in March.”

Bloomberg, 31st-October-22


High Yield

Investment Grade




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