EU Close

€IG cash pointed to a strong finish this week, Sartorius (on earnings) & Tapestry among the best performers. Today's rally adds to a -4/-6bp move WTD for €IG/HY cash. iTraxx closed -2.2/-14.2 over the week lagging headline cash - a theme we've seen this yr & could be a tailwind for basis to move higher again.

Supply expectations remain muted (rolling earnings blackouts continue) & are ~unch from this week at ~€18b & (for $IG) $20-$25b. We've seen noticeable slowdown in cash compression across both € & $ - there has been a pick up in supply in both regions ($HY saw its busiest day in 3-months with $3.5b on Thursday) & that as the driver is echoed in risk sentiment that's otherwise looked to have held up - $ & €IG still managed to compress 1-2bps & some stronger compression in BB/B spreads - $CCC only one wider WTD & continuing its YTD underperformance.

€IG eqv's finished +0.6% today - broad based gains led by LVMH (+12.9%) & peers. Utilities only sector in the red after RWE (-6%) issued weak FY24 earnings guidance on falling energy prices in Euro wholesale markets - its dragged on index heavyweights Engie & Enel as well. The equity basket ends the week over 2% higher and closer to its early Jan highs - reversing some of the decoupling in spreads vs. equities we commented on last week. Similar reversal up in our $IG basket & as we noted FY24 EPS growth (for major equity indices) are unch to higher since earnings began. That'll optimism will be tested again next week with a heavier earnings schedule.

Big week ahead for macro with Fed & BOE meetings - split in front-end pricing between the two has driven credit yield divergence. £ spreads playing catch up this week though still lags $/€ YTD moves. Treasury refunding announcement last time caused some rates vol & it begins with borrowing estimates on Monday before the refunding announcement itself on Wednesday. Its labour market heavy in data for US - Fed will have ADP employment for Jan & ECI for Q4 in hand - our Economist flags ECI is cleanest measure for wages & has been directly referenced by Powell - though it lags (in timeliness) the AHE from payrolls that we get post-Fed on Friday.

Focus in Euro on rolling Jan inflation (Tue-Thur) but we also get first glance at Q4 GDP & in UK its BOE meeting focused including the voter breakdown, statement, minutes & new forecasts from MPR.