We saw markets soar last week as the ECB indicated vigorous action, with Fed-like actions to support debt instruments. This was the kind of rhetoric the market was looking forward, to put a floor on the beta exposure. Stocks soared and are within spitting distance of their YTD highs. Credit markets also did quite well; IG18 representing the investment-grade markets shed some 6 bps to end up at 104. High Yield did even better and gained almost one point to end up at 97 (price level). This lends credence to our repeated assertions that macro news has been the main driver of the market. Corporate earnings have generally been on the softer side, although this indicates good fiscal management given that revenues are the main culprit. However, with cash hoards in the trillions across corporate America, it is safe to say that corporations are sanguine about medium term to long term prospects and are waiting for catalysts that will convince them to get into CAPEX mode from cash mode.
Coming week in credit markets – July 31, 2012