Fixed Income Markets: The Week Ahead
Senior Fixed Income Strategist
Summary: The first US presidential debate will drive risk sentiment and the primary bond market this week. In the meantime, in China, Evergrande's notes continue to fall, threatening the overall Chinese bond market with a potential liquidity squeeze and numerous defaults. This adds pressure to the emerging markets as the sub-Saharan region sees Zambia heading for default and countries such as Angola and Chad look for debt relief from some creditors.
This Tuesday, there will be the first US presidential debate. As we approach the US election, we will see the US primary fixed income market slowing down. Investors should be cautious on risk as last week US high yield credit spreads widened, and Aethon United had to pull a junk bond deal from the market. This week credit spreads will remain sensitive as the CDX North America High Yield index will see 11 additions and removals.
In Europe, the market will closely monitor Lagarde’s speeches on Monday and Wednesday, hoping for more stimulus. Sovereigns from the periphery might rise if the need is satisfied with further aid.
We believe the main area to watch is the emerging markets. In China, Evergrande bonds continue to fall, contributing to a higher risk of refinancing for other Chinese corporates. In the meantime, Zambia is looking to delay coupon payment on his sovereign debt, and other sub-Saharan countries are looking to seek relief from creditors. If you want to learn more, we are following up with an in-depth analysis on EMs bonds later today.
What to watch for this week:
- European Union: Lagarde speech at the European Parliament hearing
- European Union: consumer, economic, industrial and services confidence data for September
- United States: Consumer Confidence
- United States: Presidential debate
- European Union: Lagarde speaks at ECB
- Eurozone unemployment Rate
- Eurozone CPI numbers
- United States: Change in non-farm payrolls
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Energy crisis could turn energy stocks into secular winnerWith long-term expected returns for the global energy sector close to 10%, we look at 40 stocks that could be set to cash in.
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.