Brace for liquidity risks in credit, bond yields to fall, and pressure on Gilts

Bryn Jones, head of fixed income at Rathbones Investment Management, discusses how traders can prepare for a busy week for data namely, the Fed and Bank of England’s interest rate decision. He also dives into how trading desks can mitigate year-end liquidity risks; he unpacks his outlook on the turbulent bond yields, HY Vs IG, and where we might see some pressure on the UK Gilt market.

North Amercia

  • Equities volumes are low and liquidity is good compared to October 2022. US spreads have tightened since August 2023.
  • Data: US House Price Index, Fed’s Interest Rate decision, Unemployment Data, and earnings e.g. Apple, BlackRock, Toyota and Qualcomm.
  • Primary Equities: 4 IPOs expected at $75.6 million. The biggest deal expected is Shimmack Corporation.
  • US axe data, which is within normal ranges, indicates a higher proportion of buying versus selling in credit.

Europe and the UK

  • Equities volumes are down for the  year to date and October 2022. Euro investment grade volumes are up, and bid-ask spreads are tight compared to October of last year.
  • Data: UK Mortgage numbers, EU’s GDP Growth and Inflation, the Bank of Englands’s Interest Rate decision and earnings e.g. HSBC, Carlsberg an Panasonic.
  • Primary equities: One IPO expected on Nasdaq Riga. APF Holdings seeking to price at $2.1 million.
  • EU axe data, which is within normal ranges, suggests a higher proportion of EU dealer asks versus bids in credit.
  • GBP axe data, within normal ranges, suggests much higher net buying versus selling of credit.

Published on October 30, 2023

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