This site uses cookies to provide you with a great user experience. By using BondbloX, you accept our use of cookies.
US Treasury yields shifted higher by 4-5bp after a solid jobs report on Friday that indicated signs of strength in the labor market. US NFP for December 2023 was 216k, higher than the surveyed 175k and last month’s revised 173k. Unemployment was at 3.7%, lower than the surveyed 3.8%. Average Hourly Earnings (AHE) YoY rose 4.1%, higher than the surveyed 3.9%. However, the ISM Services Index dipped to 50.6, lower than expectations of a 52.5 print, as the Employment Index contracted sharply to its lowest level in over three years to 43.3, vs. expectations of 51. The industries reporting a decrease in employment in December included Real Estate, Retail Trade, Information, Management of Companies & Support Services and Finance & Insurance. US credit markets saw IG CDS spreads tighten by 0.6bp and HY spreads tighten 4.1bp. US equity markets closed slightly higher, ending a three day losing streak, with the S&P and Nasdaq up 0.1-0.2%.
European equity markets however ended lower. Credit markets in the region saw the European main CDS spreads widen by 0.2bp while crossover spreads tighten by 0.9bp. Asian equity markets have opened broadly weaker today. Asia ex-Japan IG CDS spreads widened by 1.2bp.
Long Stop Date is a clause seen in mergers/acquisitions and is the date defined by contract as the latest point in time by which the transaction can be completed. All conditions to the transaction must be satisfied by this date. If not, the parties to the transaction can withdraw from the deal. The purpose of a Long Stop Date is to undo a transaction contract that is not completed.
On Preferring Corporate Debt over EM Sovereign Debt
Samy Muaddi, EM Debt Strategist at T.Rowe Price
“We’re de-risking our book going into 2024, corporate debt is actually more defensive. Corporate notes, by contrast, stand to benefit from shorter duration — making them less sensitive to interest-rate uncertainty — and as management improves. Even Argentine power firm YPF SA and Ukrainian poultry producer MHP SE have proven resilient. We’ve seen greater sophistication and financial management from the CFO suite and these companies that are able to manage their dollar inflows and outflows even during periods of sovereign stress.”
Pramol Dhawan, managing director and head of emerging markets at Pimco
“We are constructive on Turkish assets, in particular local currency assets, due to the tightening in financial conditions to rein in spending and control inflation and the gradual easing of regulations that distort the asset prices. A period of real FX appreciation coupled with tight fiscal policy is needed to bring down inflation towards target levels. We are already starting to see some benefits materialize from this coordinated policy framework.”
On Rate Cut Bets for 2024 by Bond Traders
Rick Rieder, chief investment officer of global fixed income at BlackRock Inc.
“The market got way too ahead of the Fed. I think you can start owning interest rates, this back up is great. I will get “really excited” about Treasuries if rates rise another 15 to 20 basis points.”
Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities
“What we are getting now is creating volatility and that makes sense. It’s certainly not inconsistent with a Fed on hold and the next move lower. The March meeting still seems tight.”
On Fed Unwinding Its Balance Sheet
Mark Cabana, head of US interest rate strategy at Bank of America Corp
“This is a very prudent step. We very much worry that the lowest comfortable level of reserves is substantially higher than what the Fed had previously suggested it might be. It’s constructive that they’re starting these discussions now as opposed to waiting and needing to start them as money-market rates rise much more rapidly.”