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

Published on 30 October 2023

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.