We came to work yesterday to see a sea of green and futures pointing higher, the screens were being lifted and Brent moved all the way up to $43.5/b levels. It looked like the week would end on a good note and with a happy mood… and then “screech, halt, thud” happened. The rally has stopped abruptly and the US open signified an almost 2% fall in SPX and INDU and a 1.5% fall in NDX (the latter however completely recovered in the later trading hours to reach record highs once again). The fall came despite the better Jobless claims data out of the US, with both continuing and initial beating expectations (continuing: 18mn vs 18.95mn exp; initial: 1.314mn vs 1.375mn exp). Today we are also opening on a weaker tone with HSI lower by 2.18% and Chinese stocks lower by around 3%. UST 10Y yield is at 1.276% (12bps down from yesterday highs) and Brent down to $41.6/b at the time of writing. The reason for the above once again could be attributed to the new records in new COVID infections as well as the rising deaths. HK announced that they will close the schools once again, Australia is tightening inbound travel and Tokyo jumped. US cases topped 60k for the first time, while global deaths surpassed 554k.
In Europe the peripheral EGBs widened slightly, as German Bunds followed the UST rally in the risk off move 10Y DBR down 3bps to -0.47%. BTPS traded 2-3bps up in yield, while GGBs remained marginally flat. SPGBs traded about 1bps down in yield while CYPRUS was the outperformer, with CYPRUS 40 yields trading down 2bps after this week’s earlier widening on the back of the tap issuance
In MENA sovereigns yesterday the IG sector flourished initially, with all KSA, ADGB and QATAR riding the “buying wave” to show more than 1pt gains in the long ends, however gave up at least half of the daily gains later in the day with the risk off mood resurfacing. In HY, EGYPT 50s was seen trading above 102 levels in the European session yesterday, however, is down again to high-100 levels today. The similar moves were seen in OMAN and BHRAIN curves, although the market in those seemed heavier and buyers more reluctant.
In Latam, the primary spree continues to be strong with 2-3 issuers tapping the market per day for the last couple of days. The new TELEFO 30 out of Columbia was the outperformer, seen trading at 101.5 lvls yesterday (reoffer 100), while EEPPME 31s traded just above reoffer. The underperformer was the new B- rated ELSALV 52s, that, despite successfully allocating $1bn in bonds in the primary, were quite week in secondary trading more than 1pt below reoffer. Yesterday new OCENSA 27s also successfully got issued at 4.125% yield and was seen bid at +1pt into the close. Mexican major bank Banorte (BANORT) came to market with a NC10 perp at 8.375%. From sovereigns, COLOM 51s continued to slide yesterday after reaching the highs of almost 104 levels earlier in the week, with the bond falling to high 101 levels on the drop in oil. MEX 47s exhibited similar moves, down 1pt on the day, while Pemex underperform the sovereign (bonds -0.75/-2pts) on the back of HF and RM selling. In HY sector, ARGENT was weaker, down 1.5pts on the day, following the rejection of the restructuring proposal by some of the bondholders.
In CIS region, IG part traded stronger on the day with RUSSIA 47 adding 70c, dropping 3bps in yield, while other tenors also moved down 2-3bps in yield. KAZAKS and ARMEN curves gained 10-30bps in price. In Corps, notably, KTZKZ spreads to KZOKZ have returned to flat levels, from 50bp a month ago. In HY sector, UZBEK 29 was the outperformer, gaining 50c, while UKRAIN was the underperformer, down 60c-1.2pts as investors continue to digest the implications of head of NBU resigning.
In SSA, IVYCST was the underperformer on the day with the news of the death of PM Gon Coulibaly pushing the yields up 15-20bps, the buyers however seemed to be eager in the morning to pick the paper at the lows with low offers quickly picked, leading to approx. 1pt in cash price bounce back. The rest of the space seemed to be better offered despite the initial gains in price, with outflows seen in ANGOL, KENYA and NIGERIA.