Unpacking the Fed’s Next Move, Consumer Concerns, and Gilt Volatility

Published on 5 June 2023

Luke Hickmore, investment director at abrdn, walks through the likelihood of a pause (or “skip”) in the next Fed rate decision, the soaring numbers in consumer debt, why volatility in the Gilt market is set to continue and how his trading desk will be preparing for this week.

North America

  • Equities and IG bond volumes are high for the year and bid-ask spreads are tighter week on week
  • By Friday, the short interest levels for Diversified Financials dropped by 8%.
  • Data this week: US Sector Services, Initial Jobless Claims, and Canada’s Unemployment Rate.
  • US axe data, which is within normal ranges, indicates a slight skew to selling versus buying in credit.

Europe and the UK

  • Volumes across assets are high for this year. Bid-ask spreads are tight for 2023 levels.
  • Energy stocks The average cost of short interest rose by 6.3% and the average cost of credit protection fell by 1.7%.
  • Data this week: Retail Sales numbers are out Tuesday and the Eurozone GDP and Unemployment Numbers are expected on Thursday.
  • EU axe data, which is within normal ranges, suggests a slightly higher proportion of EU dealers buying Vs selling in credit.
  • GBP axe data, within normal ranges, suggests a slight skew to selling Vs buying of credit