A new wave of bond issuance; EU Vs. US credit and the knock-on effects of China

Published on 4 September 2023

Sarang Kulkarni, senior portfolio manager at Vanguard, discusses how traders should prepare for the week ahead in anticipation of an uptick in bond issuance. He also unpacks the risks of mispricing the US slowdown; he gives his take on EU Vs. US credit and talks through the knock-on effects of ongoing weaknesses in Chinese manufacturing.

North America

  • Equities volumes are still low for the year and liquidity still appears good for 2023 levels.
  • US investment-grade debt volumes are up but still below year-to-date averages, and bid-ask spreads hit some of the tightest levels seen all year.
  • Data: PMI Services September 6, Initial Jobless Claims September 7, and the new bond issuance calendar.
  • US axe data, which is within normal ranges, indicates a very slight increase of bids versus asks in credit.

Europe and the UK

  • Equities volumes have yet to bounce back but liquidity still appears good.
  • Euro investment-grade debt volumes showed signs of recovery and bid-ask spreads continue to be good for the 8-month average.
  • Data: European GDP Growth on September 7.
  • EU axe data, which is within normal ranges, suggests a slightly higher proportion of EU dealer bids versus asks in credit.
  • GBP axe data, within normal ranges, suggests much higher net buying versus selling of credit.