What I’m sure we’ll all miss if Trump doesn’t get re-elected is the constant confusion as to what’s going on. Whether it’s about medical properties of bleach as a treatment for COVID or going from “there will be no fiscal bill before elections” to a stimulus deal having a “really good chance” in the span of 2 days, all is something we all got accustomed to in the last 3 years. At least Nancy Pelosi, the House speaker has confirmed the negotiations on the stimulus, so we got a continuation of the risk on rhetoric yesterday, pushing the equities higher, despite the mixed jobless claims data yesterday. Initial claims printed at 840k vs 820k exp and 849k revised previous reading, while Continued claims decreased to 11mn from 12mn previously and vs 11.4mn exp. Equity benchmarks were all in the green with Nikkei 225 adding 1%, the STOXX 600 and DAX growing 0.8-0.9%, FTSE 100 at +0.5% and S&P 500 advancing 0.8%. UST curve was stable with 30Y yields trading around 1.56-1.58% area. Oil, however, was one of the outperformers, with Brent rising more than 3% to $43.3/b levels at the time of writing.
In Europe ECB minutes were published for its September meeting yesterday, which noted the concerns of policymakers about the strong EUR and led them to signal that they would be closely monitoring the currency. German Bunds continued to advance with 10Y yields down 4bps to -0.534% this morning. Periphery outperformed with SPGB 48 decreasing 6bps in yields after Tesoro announced a bigger than expected reduction in issuance for 2020. GGB curve lost 7bps in yield with GGB 42 at 1.23% this morning, while BTPS tightened 4bps, in line with Bunds.
In CIS, all eyes are on renewed Armenia and Azerbaijan conflict, with Putin calling for a ceasefire and inviting foreign ministers of both to hold talks in Moscow. UKRAIN curve traded tighter and steeper on the day with UKRAIN 30 EUR up to high 84 levels, while BELRUS added 50-60bps in price. RUSSIA and KAZAKS curves continued to trade stronger, up 1pt+ in the long end.
We saw another strong session in MENA as well yesterday as higher oil and a risk on rhetoric pushed the IG Sovereign spreads 3-5bps tighter on the day with short end and belly of KSA and ADGB leading the way. Long end also felt some love with the recent ADGB 70 adding 1.2pts in price and KSA 60 up 2pts. HY also continued to advance with EGYPT 50 adding another point to mid-102 levels, OMAN was the outperformer of the space, tightening 15/20 bp in yield terms (+1.5pts in price in the long end). Turkey was the weakest performer yesterday, as sanctions worries sent the bonds wider initially. The new TURKEY 6.375 25 flee to low 98 area however managed to recover 1pt to 99 levels during the day.
SSA performance was also in line with the rest of the markets. Generally everything traded up 1-2pts with Ghana an interesting trade yesterday, as it was hit early on, however manged to bounce back well into the close, ending the day 2-3pts higher post the news of the Energy reform that acted as a good sign and a positive catalyst. ANGOL we so buyers in the long end appear again (+1.5-2pts) with offers hard to come by. IVYCST also continued to be bid with the headlines of the IMF review ahead of the elections, while ZAMBIN saw more buying into the next week’s coupon (+50c) with investors expecting them to keep paying.
LATAM space saw some activity in the primary market yesterday with 3 new issues coming to capitalise on the positive markets. BAHAMA issued a $600mn of a 12Y bond with an 8.95% coupon with the bonds seen trading up 30-50c. In Corps we had PEMEX issuing a new 5Y bond at 6.95% yield, gathering a whopping $10.3bn books for a $1.5bn issue size (bond is up 30-50c at the time of writing with the performance slightly dampened by the pressure from fast money accounts) and a Chilean ANTOLN 30, which also gathered a 10x over books and seen trading around +50c-1pt in the grey. The current PEMEX curve traded well despite the new supply with the curve ultimately closing + 0.5/+1.75pt with the long-end outperforming. Elsewhere, ARGENT closed +60c with the news of higher FX reserves helping the sentiment in the name. BRAZIL and CHILE were the underperformers in the IG space, only adding 1.5pts in the long end vs 2-3pts for COLOM/PERU/URUGUA, lagging slightly after outperforming in the previous weeks.