Wow! It’s a race to the bottom regarding global rates! First, it was our US-denominated QE and then Japan jumped on the printing bandwagon, and then now Europe and more recently, India. Every sovereign is ready to print money to protect its currency (read exports) and does not want to be left behind. And so, once again, as we have seen in the last few years, macro technicals are once again dominating credit and equities and all between. The only way that credit fundamentals can drive the wagon is if defaults rise meaningfully or earnings drop precipitously and thus far, none of that has happened. Defaults are still very low and earnings, while not spectacular, are still chugging along at GDP-speed. Balance sheets are still in good repair and so, the saying is or will become, “as QE goes, so will equities and credit”.
And so it goes.. new issues continue to be overbid and secondary flows are strong and well bid. Cash still looking to eke out gains wherever it can, and a sanguine feeling about the economy with no minefields in sight helps.
investment grade +72 bps over swaps
High yield .. $106 price.. 6.125% yield to maturity.
Emerging market +110 bps over swaps