Wednesday Market Recap

Uneventful day, all-in-all.  Here's some data and thoughts.

Bond market data and breadth (FINRA/TRACE):

Volumes were down approximately 12% today in  both IG and HY.  Advance/Decline issuer ratios were 1.43x and 1.02x for IG and HY, respectively.  Microsoft was one of the larger issuers today, doing $4.75B in 3s, 5s, 10s and 30s.  Microsoft sold $1B of the 3yr at a coupon of 0.875 percent, or +25bps, the lowest coupon in over 40 years.  Still think credit has legs and a little room for upside.  Until the change, clip the carry.

Some high yield info (new!):

As the KDP indices show, not much of a change in returns today.  Note the mid-grade index, this is high BB and low BBB names.  Historically I have liked the "5B" space as it is interesting in risk/return space and can help increase the average ratings of a high yield portfolio (or in the "old days", a CDO).  You can find this info here:  KDP Index


And the yield curve:

Govt debt had a good day today in the longer end as participants digested the FOMC speak and the weak mortgage/housing data released today.  I still think that risk free has more upside from here as rates are going nowhere fast from a policy perspective and inflation is nowhere in sight (despite the CAG and GIS statements).




Equities (table by S&P):

Domestic equities vacilated throughout the day as investors seemed to step back and take a breath from the recent market strength.  Housing and mortgage data certainly didn't help equities as it pointed to further economic weakness.  Utilities and materials showed the most strength, returning +64 and 36bps respectively (note commodity currencies as well when looking at materials).  International markets fared worse as investors pondered the various sovereign auctions and the outlook for the bloc.  So many mixed messages and data in the market (economy less weak, earnings okay, guidance not so good..) that it is difficult to ascertain value.  Trend is up near term though, which still warrants a tactical overweight.





Currencies (table byADVFN):

Dollar weakness was the theme in the currency markets today as participants traded out of the weakened currency (defecits will do that).  I personally like the commodity currencies (aussie, loonie and kiwi) as well as the swissie and the yen.  Cautious on EUR and negative on the pound and USD.


Bottom line:  mixed on risk, positive inertia on risk free and dollar weakness.  Taken as a snapshot (blinders to the trends) it would look like a transition away from risk - market and sovereign and into safer havens such as treasuries, utilities and commodity currencies (in itself a mixed cyclical message).

Would love to hear your thoughts.