Credit update July 29, 2013

Credit has been moving sideways but a tad lower. Inflows are still strong into the sector. As the popular media has reported, a lot of money has also been moving into cash replenishing that asset class (as if it needed replenishing!) because a chunk of investors still don’t buy the stock market value. Overall, high yield is +3.5% or so YTD and investment grade around -2.5% for the year.

 

Banks and finance continued to round off on a few successive weeks of tightening; Goldman paper and JPM paper continued to do well along with assorted bank/finance names. The China slowdown hit commodity names hard and we saw a weakening in that sector. Names that weakened the most included Arcelor Mittal in high yield and Barrick resources and Cliff’s natural in investment grade.

 

In Gold, the bulls seem to be out after seeing derivative action that suggests being long but effects of China (in slowdown motion) and India (which placed curbs on Gold imports) that constitute the largest retail market have to be factored in.

 

Spreads:

Investment grade +75 bps over swaps

High yield –  5.875% yield to worst.

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