EU Close

iTraxx has closed +0.8/+6 wider, no clear skew in €IG cash curves with surprising strength in REIT curves despite a +6bp move in belly rates - most of the local rates moves driven by US/Powell remarks. Yet to see any divergence in Main/CDX IG - trades rangebound despite cash spreads & short-end rates divergence recently.<

Gilts are nearly keeping up with US rates today after ONS released re-weighted labour market data (ONS has had series of issues with the dataset that caused it to pause publication) - net conclusion was over last 4-months UR may have fallen- it now est's UR for 3m to Nov at 3.9% (down from 4.2% previously expected). Belly Gilts are +10bps today, BOE pricing at 84bps of cuts this year yet forward swaps are still little changed on direction & offering similar roll-down to US/Euro curves.

€IG equity basket is down -0.5%, communications the largest drag after Vodafone reported earnings that left uncertainty on German revenues ahead (incl. on Cable TV unbundling/regulation) - concerns despite a beat on Q3 & reiteration of FY24 guidance. Other falls on earnings included Nordea in Financials, Air Products in Industrial Gas/Chemicals & McDonald's in fast-food - latter struggling over the quarter in part due to lower rev's in the middle-estate on ethnic tensions in the region (which has extended to isolated impacts in branches incl. France). Leverage looks to have fallen over the year & analyst did see Capex plans higher vs. guidance in Dec - still Baa1/BBB+ € curve is little changed.

Local primary was relatively muted but $IG is seeing more activity - corporate heavy skew in line with issuance trends for Feb. For those eyeing spread curve steepening, we will get a feel for long-end yield demand on Texas Instruments (Aa3/A+) 5-part that includes a 30 & 39y. SLOOS release in a hour should give the final direction for rates today.