US Open

US & Euro rates are -2-4bps lower - Euro area PMI's this morning were stronger for manufacturing & weaker in services, composite Eurozone PMI's missed slightly at 47.9 (c48). Impact of Red Sea disruptions were still muted in EU "although disruptions to shipping in red sea caused supply chains to lengthen...manufacturing input costs continued to fall on average". That was in contrast to UK where not only did Services PMI come higher (53.8 vs. c53.2) but impact of shipping disruptions was more apparentt in manufacturing costs "Private sector firms meanwhile recorded the steepest rise in input costs since August 2023, driven by renewed cost pressures in the manufacturing sector. There were widespread reports of higher freight costs in the wake of the Red Sea crisis". Its pushed BOE easing this year below 100bps & now marks a strong divergences vs. ECB/Fed pricing. No signs of any yield buying supporting spreads in £IG though - still an underperformer this year.

$IG primary slowed down to $1.9b - MTD $158b, $17b shy of record Jan issuance in '17 - deals again priced through secondary curves. Slow-down in issuance, strong primary metrics, supportive/low-vol rates & equities in the green were again not enough to support $IG/HY spreads that ended +0.7/+1b wider. 2nd straight session we've seen $IG spreads trade sideways-to-wider despite support in rates/equities/supply - perhaps sign spreads/yields/compression has had its run for now - its brought spread underperformance vs €IG over last week and half to 6bps (rates between two trading in tandem in the belly over that period).

€IG looks skewed tighter, Netflix index € lines 4-8bps tighter, local equities up +0.9% & relatively broad based (€IG eqv's +0.5%), S&P futures +0.25% with another busy day in pre-market US earnings