EU Close

iTraxx has closed -0.4/-4bps tighter - CDX (+0.4/+1.6) moving to equities today (S&P -0.2%) & finding little support from rates (-5bps) though $IG cash is pointing to a move tighter. €IG index is showing slight skew to moves tighter today, RE curves continuing to outperform. Local banks mixed after US banks reported, overall up alongside a broad-based gain for local equities (Stoxx +0.8%). Local IG/HY supply this week totalled €48b (€35b in financials) above expectations for €33b & though metrics in deals have not been as stellar as $IG this week, spreads have moved in par (~6bps rally). Strong outperformance from local HY vs $ - across the rating buckets & despite relatively robust supply (~€5b). Next weeks supply expectations are at ~€32b with €22b from financials noting this weeks skew to fins has had little impact on headline spreads. $IG estimates are at $30-35 despite the 4-day week - we may see a fin skew in $ as well next week as banks emerge from earnings blackouts. This weeks above consensus $43b leaves only $60b to meet Jan expectations (for $160b) in $IG. Focus next week continues on earnings and in Economic data comes back locally to UK CPI & UK Real Retail Sales both for Dec and UK Wages (AWE) for Nov. We also get US retail sales (for Dec) but in nominal.