The markets are flaring slightly better this morning after a generally weaker tone all week amid the fears of the resurging coronavirus cases across the globe: Beijing’s most recent outbreak has now exceeded 150 cases and in the US Texas, Florida and Arizona reported a jump in cases. Equities traded down yesterday as much as -1.3% (S&P 500) on the day yesterday, however managed to recover some losses despite the weaker than expected jobless claims data from the US (1.5m vs cons. 1.3m initial) and ended the day at -0.53% (S&P 500). Today, however they are in the green with S&P futures up 0.44% and German DAX up 0.61%. The headlines out of Beijing today are definitely helping the risk on mood, as China was told to step up the purchases of US Farm goods to hit Phase 1 deal targets after the COVID-19 related slowed China demand in the prior months. Oil prices pushed higher overnight, building on gains in the previous session, WTI +1.6%, Brent +1.3%, after OPEC producers and allies promised to meet their supply cut commitments and two major oil traders said demand was recovering well.
In Europe, ECB’s TLTRO-3 came as a very strong number, handing banks €1.31trn in ultra-cheap long-term loans. This essentially combines the €418bn of old TLTRO-II money and the €389bn of short-term loans and adds another €500bn into the mix. As a result, we have seen a strong price action across Eurogovies, with buyers especially prominent in the periphery. SPGB curve strengthened by 7bps in yield, Cyprus -3bps and BTPS -6bps. GGB underperformed however staying marginally unchanged on the day. In the UK however, UKTs did not fare that well with the long end UKT 49 dropping 5pts yesterday and continuing it’s downfall today (another -1.375pts at the time of writing) after BoE s £100bn boost to its QE program was offset by their announcement that it’s weekly bond buying will be halved.
In CIS space, Belarus has successfully tapped the markets on Wednesday, issuing $1.25 bn across 2026 and 2031 tranches. Both traded stronger in secondary on the day yesterday, up around 50-75c, however finished the day with BELRUS 2031 down to reoffer, while BELRUS 2026 down to 40c above reoffer. TAJIKI 27 advanced 40c in price. Ukraine’s curve slipped 20-70c in price. RUSSIA curve was marginally unchanged/slightly higher on the day with RUSSIA 47 seen trading at 133.55.
In Mena, IG names traded on a better tone yesterday with ADGB, QATAR long end up 60-75c on average. KSA curve also traded better, however some curve steepening was seen with 10s30s spread 7bps wider. Better buyers were visible in the belly of the curves among both locals and internationals. HY however was susceptible to the risk-off dynamics, with OMAN curve closing 25-70c down and BHRAIN down 10-20c, despite some demand coming in with US.
Latam bond markets remained relatively quiet yesterday. In ARGENT selling was visible in $ curve from locals, however the demand from international HF and RMs has picked up into the close, leading to bonds bouncing 50c off the day lows in the evening after being as much as 1.5pts lower. ECUA was not as fortunate however, continuing to fall throughout the day, down 1-2pts on average. Lower beta names fared better. COLOM has recovered yesterday, after selling as much as 4pts in 2 days in the long end following the local curve steepening as the Fiscal Rule Consultative Committee accepted the proposal submitted by the Ministry of Finance to suspend the application of the fiscal rule for 2020 and 2021. Recently issued COLOM 51 bounced back to high 99s area after trading as low as mid 97s. MEX 48s ended the day 1pt higher after initially trading 50c lower, while CHILE 50s traded up 2pt to end the day at 110.5 lvl bids. BRAZIL lagged however, actually ending the day 50c-1pt weaker as negative headlines surrounding Bolsonaro’s son weighed on the curve. Brazil’s central bank left the door open to more monetary easing after cutting its interest rate to a record low 2.25%.
In SSA, the market was weaker, driving the sovereign bonds down around 1pt on average. Long end was better offered but some demand remained in the short end. NGERIA 49 was seen trading in high 100s and sellers in ANGOL curve started coming out with even ANGOL 25s seen offered in high 80s area. In Corporates and banks however, the demand remained strong with any loose offers being quickly snapped up.