PVM Easter Monday bits / LQD, HYG, IG progress/Eurogroup $590bn virus stimulus/ OPEC++ skinny deal

Updated: Apr 29, 2020

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  • Markets improving on unprecedented FED action - Friday's $2.3trn credit move

  • If Aviation was a country It would be The World’s20th Largest by GDP, employs around 65mio people around the world..

  • With all these MASSSIVE Fed actions (and others), many talk of inflationary pressure, well yes, but for inflation to kick higher, you need strong demand…we are not there yet…and probably not there for a long while (unless USD debases lower perhaps..)

  • NYC – Covid19 hospitalized change (new hospitalized and discharged) – lower trend (chart)

  • High Yield credit is now so 'loved' in ETF space that it trades at a historic premium to Net Asset Value, based on stats for HYG. It really is an unprecedented (bull) market out there. Interesting times... FED action = (almost) no price discovery anymore.. (chart)

  • IG - Investment grade corporate bond index back to near ALL TIME highs. Fed buying junk bonds too. Risk of bankruptcies reduced even with 20m unemployed..

  • Coronavirus, la faillite de la logique marchande – Bilan

  • The return to ‘normal’ will take months…..Tens of Millions of unemployed people globally will only gradually be re-employed. The full recovery is a 2021 story. Big question is... is the market already looking to 2021 and forgetting 2020... Pretty risky if so, but on the other side of the equation, Central Banks and Governments are going beyond ‘all-in’, having said all this there are going to be many bankruptcies going forward, nationalizations (part of) and lots of weaker player integrated to large groups

  • Saxo summary : Following a lot of bilateral calls between Germany, France, Italy and the Netherlands, and one of the shortest plenary sessions in the history of the Eurogroup, yesterday evening, the finance ministers reached a compromise on the use of the ESM and agreed on the Commission's unemployment reinsurance scheme (SURE) and on EIB loans

  • FED balance sheet up to $6trn – en route for $9bn within months…

  • U.S. banks prepare to seize energy assets as shale boom goes bust. NEW YORK (Reuters) - Major U.S. lenders are preparing to become operators of oil and gas fields across the country for the first time in a generation to avoid lo

  • sses on loans to energy companies that may go bankrupt, sources aware of the plans told Reuters

  • OPEC, oil nations agree to nearly 10M barrel cut amid virus – as expected, at least they agreed to something, but only strict minimum and valid for 2months only (for now) >>> WTI prices which hit $28/29 late last week on ‘hope of more cuts, back to $23 – mid/low end of (recent) range

  • Japan sets aside ¥243.5 billion to help firms shift production out of China – supply chains changing..less China focus going forward, Japan won’t be the last country to do so – over time..

  • Goldman Sachs: "It is remarkable that the US is in the midst of its greatest economic crisis in nearly a century and unprecedented societal disruption while the stock market trades at the same level as it did in June 2019, just 10 months ago.". Goldman Says U.S. Stocks Have Likely Bottomed on Policy Support (they were very bearish up to a week ago..unprecedented FED action forcing adjustments in forecasts and expectations…)


  • So SPX has best week for many decades, when the virus data got much worse in the U.S last week – fundamentals don’t really matter anymore, when the FED and governments are so massively engaged. The FED action is mainly aimed at credit (not equities, but they had a pretty big reaction), they are helping the mechanism, still the speed and size of FED action is absolutely huge, fast and impressive. SPX 2700/2800 should be top end of the range (technically), as previously discussed. All that said, given the incredible speed and size of FED action, if we were to get the virus trend down in the US and UK now, we could see further euphoria short-term, clearly not based on fundamentals..

  • GOLD – ‘unlimited’ and ‘unprecedented’ amount of liquidities could not be more bullish for the yellow metal – testing highs ‘recent’ just below 1700$

  • USD softer – petty much across board, soonest FED

  • came out with the $2.3trn deal on Friday, although USD/EMG’s struggling to come lower, USDTRY actually higher. CABLE just made it through/into 1.25+ resistance

  • Bonds – long end stable, volatility much lower

  • So the FED now will buy CP, Muni’s, Primary and secondary IG, corp bonds, ABS of any kind, CMBC, CLO’s, leverage loans and will provide swap lines for every central banks on the planet + MM – pretty insanely huge and across

  • board hoarding – there will be plenty of criticism going forward..essentially FED bailing out the world, pretty much

  • Australian researchers 'a few weeks' from clinical trial results for coronavirus treatment https://www.theguardian.com/world/2020/apr/13/australian-researchers-a-few-weeks-from-clinical-trial-results-for-coronavirus-treatment?utm_term=Autofeed&CMP=twt_gu&utm_medium&utm_source=Twitter#Echobox=1586764131

  • https://www.bloomberg.com/news/articles/2020-04-13/goldman-says-u-s-stocks-have-likely-bottomed-on-policy-support?sref=ZfugcRiZ Goldman Says U.S. Stocks Have Likely Bottomed on Policy Support

  • https://www.forbes.com/sites/jamesasquith/2020/04/06/if-aviation-was-a-country-it-would-be-the-worlds-20th-largest-by-gdp/ If Aviation Was A Country It Would Be The World’s 20th Largest By GDP – plenty of arguments to not let it crash, but some sort of consolidation with a few airlines dropping out, will give a better chance for the bigger and better to thrive…so we might not want to trash the sector..some sort of adjustment clearly will need to happen though, as demand won’t be back to its full capacity for a long while

What a crazy dislocated week!

  • Goldman Sachs: "It is remarkable that the US is in the midst of its greatest economic crisis in nearly a century and unprecedented societal disruption while the stock market trades at the same level as it did in June 2019, just 10 months ago."

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