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US Treasury yields inched higher by 2-5bp across the curve, recovering slightly from their down-move over the last two days. The US Core PCE price index increased 2% YoY in Q3, the slowest since the end-2020. Estimates were at 2.3%. GDP for the period was revised lower to a 4.9% annualized rise vs. expectations of 5.2%. US jobless claims for the prior week came at 205k, better than forecasts of 215k. US credit markets saw IG CDS spreads tighten by 3.6bp and HY spreads tighten by 16bp. S&P and Nasdaq rebounded on Thursday by 1-1.3%, after dropping by 1.5% each a day earlier.
European equity markets ended slightly lower. In credit markets, European main CDS spreads were 0.5bp wider and crossover spreads widened by 0.3bp. Asian equity markets have opened broadly weaker today. Asia ex-Japan IG CDS spreads were 1.1bp wider.
As the name suggests, convertible bonds are debt instruments issued by a company where the bonds can be converted into equity shares of the company by the bondholders at a particular ratio and at particular points in time. Thus, it is a hybrid security as it has characteristics of both debt and equity. Convertibles generally carry a lower coupons and sometimes tax advantages for the issuer.
On Safety Over Yield in Emerging-Market Bonds – Macquarie
“The countries that we like most in the current environment are some of the most boring. They have external buffers. They may not have double-digit yields, but they may be in a much better risk-adjusted trade”… Paraguay, Dominican Republic, Chile, Ivory Coast and Indonesia are better prepared to navigate a potential slowdown in global growth.
On Airlines Emerging as a Top Trade in LatAm Bonds
Valentina Chen, co-head of EM at Mackay Shields
“A rally would be nice, but just stability is nice too. We get compensated. Once interest rates in Latin America start to decline, this will boost the demand for travel even more”
Sergey Goncharov, a money manager at Vontobel Asset Management
“Economies will keep recovering, FX is likely to be in consumers’ favor. Net-net, the demand side should recover… airline space will probably be more of a niche still, rather than a bigger point of focus”
Carolina Chimenti, a credit analyst at Moody’s
“They came out much stronger because they reduced their debt balance and improved the capital structure”
On US labor market resilience keeping economy afloat
Christopher Rupkey, chief economist at FWDBONDS
“There is plenty to cheer about the economy, and next year should be even better as the Federal Reserve takes the brakes off the economy now that inflation is going their way”
Gus Faucher, chief economist at PNC Financial
“This is remarkable progress given that core inflation was at 6% annualized in early 2022”