While there has been a general risk off tone since the non-farm payroll report last week, the changes in most asset values have been generally muted. Equity selling has been limited, treasury rates remain near the mid-point of recent ranges, and corporate issuance remains robust and easily absorbed. We, unfortunately, do not expect much from next week’s FOMC meeting and, therefore, expect the current logjam to remain. While it feels as though the contingent expecting stronger growth to return once the snow melts have the upper hand, continued conflict in Ukraine and the resurfacing of growth and credit concerns in China have kept the safety bid in the market. We would pontificate that any default in China is a government sanctioned event and the overall result of a few, or possibly several, defaults are healthy for that market’s development. We will respect the doomsayers and acknowledge that the market remains opaque to us and most western investors, but also point out that $3.8 trillion in reserves is no small bankroll.
Rates have generally been range bound, which has made for a perfect corporate issuance environment. Bloomberg data puts March issuance in excess of $90 billion, which follows record or near record issuance in January and February. These deals have recently pressured corporate spreads and HY average yields, although we will point out that IG spreads are still near start of the year levels, while HY levels are 30bps richer on a YTD basis. There has been a scarcity of economic data this week, however we get retail sales and confidence later in the week, with next week providing a few looks at housing and inflation. Read the full commentary now.
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