Markets Brace for Central Bank Verdicts, T-bill Volatility, and Indices Shake Up

Published on 12 June 2023

Ed Wicks, global head of trading at Legal and General Investment Management (LGIM) discusses how traders should prepare for the week ahead amid the long-awaited Fed and ECB’s rate decisions; the anticipated flood of Treasury issuance; LGIM’s trading strategy in preparation for elevated volatility and the upcoming global indices rebalancing.

North America

  • Equities volumes are low and bid-ask spreads are wide for the year. Liquidity in US IG remains good.
  • In primary equities: There will be several IPOs in Financials and Mining on NYSE, and Consumer Discretionary on Nasdaq.
  • This week’s data: The Fed’s interest rate decision will be announced on Wednesday; the US Inflation Rate is out on Tuesday and the Initial Jobless Claims report is expected on Thursday.
  • US axe data, which is within normal ranges, indicates a higher proportion of selling versus buying of credit going into this week.

Europe and the UK

  • European equities volumes plummeted but bid-asks spreads are tight. Euro IG bid-ask spreads remain tight.
  • By Friday, short interest levels in Tech fell by 13.9%, and in Diversified Financials it dropped by 10.3%.
  • This week’s data: The ECB’s interest rate decision will be announced on Thursday; the UK Unemployment numbers are out Tuesday and data on the UK’s GDP is expected Wednesday.
  • EU axe data, which is within normal ranges, suggests a 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.