Banks

As earnings season ends, we take stock of the latest US results and what it tells us about the health of corporates, the consumer, and the outlook for the broader economy.

UBS came to the market yesterday with a two-tranche $ additional tier 1 transaction, which was highly anticipated and didn’t disappoint.

Whilst bank debt has recovered from the contagion of the US regional banking crisis and the Credit Suisse write down event earlier this year, many bonds are still trading wider than they were at the beginning of the year.

Yesterday, market participants received two important reports about the state of the economy in the Eurozone. Firstly, the October Markit PMI – Purchasing Managers’ Index - reports showed a continued deterioration in growth in the manufacturing as well as the services sector.

Thomas Barkin, President of the Richmond Fed, called any (potential) upcoming recession "the most predicted recession ever".

Charlene Malik reflects on a tricky quarter for markets, highlighting the behaviour of the US Federal Reserve, the ECB and the Bank of England. Charlene then discusses the ways in which the MSB team have responded to these Q3 events.

In our Investment Grade quarterly update, Gordon Shannon, reflects on government bond yields, which accelerated sharply at the end of Q3, as well as commenting on the behaviour of the European Central Banks over the quarter and the soft-landing 'fairytale' markets had hoped for.

This morning the ONS published its monthly update on the UK labour market. Of all the G7 countries, the UK has had the most puzzling labour market dynamics post pandemic, as we discussed in a previous blog.

Fixed income investors have gone through a stressful few weeks. Since the beginning of September, government bond yields have moved sharply higher, causing spreads to widen and returns to worsen across the board. 

After what can only be described as a relatively dire year for fixed income in 2022, during which spiralling inflation led to one of the most aggressive rate hiking cycles on record, we believe the market for bonds is now looking much healthier.

As we commence upon earnings season, we will be paying close attention to another round of updates from the US regional banks, particularly within the context of a “higher-for-longer” rate environment. With wider adoption of a soft-landing view, as well as a higher treasury yield backdrop, we explore what implications this has for the US regional banks.

The last few weeks has seen a sharp move up in long dated Treasuries, since the week of the FOMC meeting in September the US 10 year has moved up 45bp to 4.75% with a brief flirt with 4.90% in the meantime