A fortnight which has displayed the fine balance markets are currently at with fears from the ever present risks of COVID continue to conflict with the ameliorating impacts of policy. With high yield spreads at 520bps we’ve gone sideways over the last two weeks but seen significant issuance across all markets.
- Policy support exhibit ‘a’ – the Fed stepped in at the beginning of last week to announce it was reconfiguring one of its investment grade bond buying programs to allow it more flexibility to buy bonds in the open market. The timing (the first significant equity/credit sell-off in a few weeks) makes us feel a little queasy as we think the Fed should be dealing with tail risks and not trying to prevent every sell-off. Markets, however, cheered the behaviour with spreads correcting their descent.