Late headlines yesterday from the IMF spooked early trade in Europe, which saw support for core debt markets. But this “will they, won’t they” (or should I say, “can they, can’t they”) approach has long been a tiresome excuse for dealers and is another reason why liquidity is so poor.
The 10yr Tsy/Bund spread remains below 150bp. Peripherals lost ground to core as we head into the weekend with BTP’s and GGB’s taking the brunt of the punishment.
The Greek stock market is down 6% and the Turkish Lira is closing the week weaker on the day (losing 0.6%).
Risk appetite remains thin on the ground, and secondary bond liquidity is still a problem. A common complaint among fund managers is when you want to sell, no one will bid (rather take an order); then when you wish to buy, you have to wait for new issues (which results in them launching too expensive)! Then the secondary markets dries within a couple of weeks.
Emerging Market bonds seem to have the most focus as far media is concerned, but I would have thought High Yield liquidity must be suffering more so! At least there are local banks for EM debt, SWF’s and index players that care but for HY liquidity is crucial! Definitely an area worthy of focused attention.
