Syz the moment

German Harmonized CPI rose to 2.8% in May YoY from 2.4% in Apr, above the 2.7% median estimate in a BBG poll of economists. German national CPI rose to 2.4% from 2.2% as expected. Source: Bloomberg, HolgerZ

A rising share of the $8.9tn high-grade US corporate bond market is at risk of being slashed to junk status, with rating agencies’ expectations of downgrades exceeding upgrades for the first time since the end of 2021. The proportion of the lowest-quality investment-grade bonds that rating agencies have on so-called “negative watch” or “negative outlook” — meaning their ratings are more likely to be downgraded — stood at 5.7 per cent this week, according to analysis by BofA Securities, including names such as Paramount Global and Charter Communications. That is almost double the level of 2.9 per cent at the start of this year. In contrast, the percentage of these bonds on “positive watch” — meaning they are more likely to be upgraded — stood at 5.3 per cent, down from 7.9 per cent in early January Full FT article >>> Source: FT, C.Barraud

Source: Barchart

📉 Trend Alert: The 1-month volatility of the CDX North America Investment Grade index, a basket of 125 equally weighted credit default swaps on investment-grade issuers, has dropped to its lowest level since the index was launched in 2012. 📊 What’s Driving This Trend? Resilient Economy: The US economy is demonstrating strong resilience, which supports narrower credit spreads. Stable Equities: Low volatility in the US equity markets indicates investor confidence, further stabilizing the bond market. Strong Corporate Health: Robust fundamentals of US companies are contributing to lower credit risk perceptions. 📈 Interest Rates & Credit Spreads: Negative Correlation: There's a current negative correlation between US interest rates and credit spreads. This means that as interest rates rise, credit spreads tend to narrow, and vice versa. Positive Impact: This trend has led to US corporate bonds significantly outperforming US Treasuries, marking the biggest relative outperformance since the pandemic crisis in March 2020. ❓ Future Considerations: How long can we expect this low volatility and narrow spreads to continue? Watch the credit market closely for any signs of weakness. Source: Bloomberg

Big moves in the Japanese bond market! The Japanese yield curve, which tracks the difference between 2-year and 10-year yields, has dramatically steepened since late March and surged even more in May. It's now at 63 bps, a level we haven't seen since January! 📊 10-year and 30-year Japanese yields are hitting decade highs, approaching 1% and surpassing 2%, respectively. As the Yen weakens, the Bank of Japan stepped in to support the JPY and recently cut its bond-buying program for the first time this year. What’s next? The BOJ might sell off its US Treasuries holdings, potentially driving US Treasury yields up in the coming months. Higher Japanese yields also mean US Treasuries are less attractive to Japanese investors, who are key players in the US market. Last summer, a sharp steepening of the Japanese yield curve coincided with a major sell-off in US Treasuries...🤔 #Finance #Investing #Bonds #JapaneseEconomy #GlobalMarkets #Economics #Investors #FinancialMarkets #BankofJapan #USTreasuries Source: Bloomberg

Source: Charlie Bilello

Source: Charlie Bilello

Source: Bloomberg, Markets & Mayhem