Trader TV: This Week – The Debt Ceiling, Divergence, and Discounted UK Equities

Published on 15 May 2023

Valerie Miles, fixed income trader at Loomis Sayles, and Louise Kernohan, portfolio manager at Newton Investment Management discuss how trading desks should prepare for the week ahead amid the debt ceiling deadlock; the fears of policy divergence; the economic impact of lending standards; whether bond issuance might remain high and the untapped opportunities in UK equities.

Recap and Forecast

North America

  • Last Week equities volumes were low, and spreads were wide. Bond spreads are marginally tighter week on week. 
  • To look out for this week – US Debt Ceiling talks and AGM meetings, such as Deutsche Bank, BNP Paribas, and JP Morgan.
  • Data on US Retail Sales, Manufacturing, and Production on Tuesday and Jobless Claims Thursday.
  • US axe data, which is within normal ranges, indicates a higher proportion of bids versus asks in credit going into the week ahead.

Europe and UK

  • Equities volumes were low and spreads were tighter week on week. Bond volumes are up week on week but spreads are tighter.
  • To look out for – AGM Meetings: Traders could assess any surprises and the EU banking sector’s stability.
  • EU / UK employment data, UK Payrolls, Eurozone GDP on Tues, and EU inflation rate on Wednesday. 
  • 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 Vs selling of credit.