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CREDIT PRE-MARKET
  • CDX has opened -1/-4, €IG cash prints look skewed tighter helped by real-estate curves. € swap spreads are resuming their move tighter (-1bp) while US swap spreads are holding flat after Monday's move (+2-3) wider. Stellar metrics across yesterday's $IG deals - final pricing flat to secondary, books covered 4.5* - inflow data from ETF's don't fully explain the pick up in demand - bbg flagging $IG ETF, LQD, has had 5 straight days inflows - but we'd note total inflows in magnitude are not jaw dropping (single day inflows late last yr topped current 1w inflows) & are concentrated to this ETF/not broad based. Though matching this supply hasn't been overly heavy this week ($25b) with ~half of Jan supply expectations yet to price. As a positive no signs of continuing $HY outflows (in ETF's) after last weeks exodus & spread underperformance.

  • Strength was not just been in primary - spreads for $IG/HY ended -2.4/-4.9 tighter - $IG has now rallied -4.5bps over the last 4 sessions & is now only ~2.5bps from last years tights - though moves are in line with equities & as others have noted strong supply in Jan hasn't always translated to a seasonally weak month for spreads. Perhaps more interesting is bid for risk despite +11bp move in rates YTD - good data may be winning for now but as we mentioned earlier, though a contraction is expected (even among most optimistic EPS measures) in earnings this reporting period (4Q23) forward guidance may be under focus given earnings are expected to grow strongly this year (adj. EPS for S&P500 expected to jump 17.3% from end of last year to Q3 of this year).

  • Action today comes after London close - 10y UST auction at 6pm Lon/1pm ET noting long-end (~20yr) credit spreads in $ have continued to outperform - flattening in $IG's spread curve has been one-way/-7bps YTD though levels are still well shy of late Oct lows. Fed's William (permanent V, relative dove) also comes at 8:15pm Lon/3:15pm ET & may finally bring some excitement to CB speak this week - Eco notes his last comments were it is too premature to think about cuts in March. Though Eco also notes insights from him on last weeks payrolls maybe overshadowed by tomorrows Dec CPI.
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