Weekly fixed income review

Week to November 15, 2019

  • In the US, 10-year Treasury yields fell by c.11bp. Early in the week, President Trump indicated a deal with China could happen soon, before adding that tariffs would be “substantially” raised if a deal was not made. China’s Ministry of Commerce indicated yesterday that removing existing additional tariffs is an important condition for reaching a deal. On the data front, US retail sales increased by 0.3% in October, a slight beat on consensus of 0.2%.
  • In US credit, risk appetite remained broadly positive, even amid more mixed trade headlines. Issuance remained strong, with the fourth-largest deal in history, at $30bn, being brought by a US pharmaceutical. Easy Federal Reserve policy and a better economic backdrop seem to be helping to push spreads tighter into year-end.
  • Core European government bond yields fell, with 10-year bund yields decreasing by c.8bp. Germany surprised markets by avoiding a technical recession in Q3, with data showing +0.1% growth (versus -0.1% expected). Meanwhile, spreads widened on the periphery amid political uncertainty in Spain and Italy: 10-year Spanish and Italian spreads over bunds widened by c.14bp and c.17bp respectively. In Spain, the Spanish Socialist Workers’ party won the country’s fourth general election in as many years, but failed to secure a majority, leading the party to agree a preliminary coalition deal with anti-austerity party Unidas Podemos.
  • In European credit, the primary market was busy, with companies continuing to issue debt before the traditional seasonal slowdown in December. Peripheral issuers underperformed given the geopolitical backdrop.
  • Campaigning for the UK’s December general election began in earnest, with polls indicating a comfortable majority for the Conservative Party. Brexit Party leader Nigel Farage said his party would not stand in seats won by Conservatives in the last election, arguably shifting the balance further in favor of the Conservatives. Yields on 10-year gilts fell by around 6bp.
  • In emerging markets,central banks in Egypt and Mexico followed the trend to ease monetary policy and cut rates. Meanwhile, ongoing demonstrations in Hong Kong turned increasingly violent. Economic data from China came in weaker than expected, with aggregate financing in October totaling CNY619bn yuan (versus CNY950bn expected).

Chart of the Week: Germany avoids a technical recession in Q3, with +0.1% GDP reading

Chart of the Week: Germany avoids a technical recession in Q3, with +0.1% GDP reading

Source: Bloomberg. Data as at November 15, 2019.

Bloomberg statistics 15 Nov 2019
 Source: Bloomberg, November 15, 2019

Economic calendar

  • Tuesday: US October building permits, housing starts; euro area September construction output; Italy September industrial sales, industrial orders; Japan October trade balance
  • Wednesday: US weekly MBA mortgage applications; Germany October PPI
  • Thursday: US weekly initial jobless claims, October leading index, existing home sales; euro area advance November consumer confidence; France November business confidence, manufacturing confidence; UK October public sector net borrowing; Japan October nationwide CPI
  • Friday: Preliminary November manufacturing, services and composite PMIs in US, euro area, France, Germany, Japan; Germany final Q3 GDP

Important information

Insight North America (INA) is part of “Insight” or “Insight Investment”, the corporate brand for certain asset management companies operated by Insight Investment Management Limited including, among others, Insight Investment Management (Global) Limited and Insight Investment International Limited. Advisory services referenced herein are available in the US only through INA. Figures shown in USD. FX rates as per WM Reuters 4pm spot rates.

Includes employees of Insight North America LLC (INA) and its affiliates, which provide asset management services as part of Insight, the corporate brand for certain companies operated by Insight Investment Management Limited (IIML).

Please note: the value of investments and any income from them will fluctuate and is not guaranteed (this may be partly due to exchange rate fluctuations). Investors may not get back the full amount invested. Past performance is not a guide to future performance.

Insight North America LLC (INA) is a registered investment adviser under the Investment Advisers Act of 1940 and regulated by the US Securities and Exchange Commission. INA is part of “Insight” or “Insight Investment”, the corporate brand for certain asset management companies operated by Insight Investment Management Limited including, among others, Insight Investment Management (Global) Limited and Insight Investment International Limited. Insight’s assets under management are represented by the value of cash securities and other economic exposures, and are calculated on a gross notional basis. Advisory services referenced herein are available in the US only through INA.  

The views herein represent the opinions of Insight and are subject to change based on subsequent developments. They are not intended as investment advice or to predict or depict the performance of any investment. The material contained herein is not intended to provide, and should not be relied on for, investment, accounting or legal tax advice. Further, this material does not constitute a recommendation to buy, sell or hold any security. No offer or solicitation for the sale of any security or financial instrument is made hereby. 

*Please read important information about Insight's data collection policies HERE before sharing your personal information with us on email.