MNI Credit Weekly : All’s Well That Ends Well?

MNI (LONDON) - Executive Summary: All’s Well That Ends Well?

• Spreads finish the week marginally almost unchanged, an outcome that seemed unlikely on Monday with sheer panic bringing the weakest day in some time. A sharp recovery sees around half of the recent leg wider retraced. That tallies with the consensus view that this was a buy the dip opportunity, although some fear Middle East tensions will continue to weigh on risk. We feel VIX will struggle to retrace fully in the short term, hence spreads will struggle to reach recent tights.
• Earnings season is ending now, with some vol still from the likes of Warner Bros and Zurich. Signs of easing input costs are helping, while labour costs remain a headwind.
• ISM Services and Jobless Claims data helped improve macro sentiment following damaging ISM Manufacturing and NFP last week. The BoJ helped calm the JPY situation, but nerves still appear fraught; witness the outsized reaction to Thursday’s claims number.
• Primary was set to be quiet, so it was a little surprising to see a print from Coca-Cola, particularly with a 29-year tranche. Unsurprisingly, that deal needed to come cheap.
• Fund flows were firm in IG with outflows from HY. Supply expectations remain subdued for next week.

Full piece here: 24.08.09 MNI Credit Weekly.pdf