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☆ Bond investors show confidence in Schwab after cost-cutting
▼ + stars: | 2023-08-23 | by ( Matt Tracy | ) www.reuters.com time to read: +3 min

The company logo for Financial broker Charles Schwab is displayed at a location in the financial district in New York, U.S., March 20, 2023. The announcement led to a 5% fall in Schwab shares on Tuesday but did not hurt investor appetite for its new bonds. "The strong response shows bond investors, at least in the near term, have gotten over their worries about the credit fundamentals of top-tier regional banks after the banking crisis in March," said Richard Wolff, head of U.S. syndicate at Societe Generale (SOGN.PA). Schwab's bond trade also drew attention as new investment grade bond supply this month has so far been lower than expected. Counting Schwab's $2.35 billion in bonds, investment-grade bond volume sits at just $3.45 billion for the week and $67.1 billion so far in August, according to Informa Global Markets data.

Persons: Charles Schwab, Brendan McDermid, Schwab, Richard Wolff, Dan Krieter, Brian Mulberry, David Del Vecchio, Natalie Trevithick, Matt Tracy, Nupur Anand, Shankar Ramakrishnan, Sonali Paul Organizations: REUTERS, Societe Generale, BMO Capital, Zacks Investment Management, Federal Home Loan Bank, Payden, Informa, Thomson Locations: New York, U.S, Los Angeles

Edward Marrinan, macro credit strategy desk analyst at SMBC Nikko Securities America, added: "Credit risk at this point is mispriced." The move prompted a sell-off in equities and slight widening in corporate credit spreads. The average investment-grade bond spreads as of on Thursday were just a few basis points wider than the tightest levels touched this year in July and 16 basis points tighter from January. Junk-bond spreads are 98 basis points inside January levels. "With market consensus now expecting a soft landing, the credit markets are arguably underpricing default risk," BMO’s Krieter said.

Persons: Brendan McDermid, Cindy Beaulieu, Edward Marrinan, Moody's, Daniel Krieter, Krieter, Marrinan, Manuel Hayes, Hayes, BMO’s Krieter, Shankar Ramakrishnan, Davide Barbuscia, Paritosh Bansal, Jonathan Oatis Organizations: NYSE, American Stock Exchange, New York Stock Exchange, REUTERS, U.S . Federal Reserve, SMBC Nikko Securities America, Reuters Graphics Reuters, Investors, Reuters, BMO Capital Markets, London, Insight Investment, Informa, Thomson Locations: New York City, U.S

May 28 (Reuters) - Good news of a tentative deal for the U.S. debt ceiling impasse may quickly turn out to be bad news for financial markets. "That's where the debt ceiling matters." In that case, "the impact on broader financial markets would likely be relatively muted," Daniel Krieter, director of fixed income strategy, BMO Capital Markets, said in a report. Some bankers said they fear financial markets may not have accounted for the risk of a liquidity drain from banks' reserves. Bankers put it to hope that the debt ceiling impasse would be resolved without significant dislocation to markets, but warn that's a risky strategy.

Rising CDS spreads signal investors are hedging bets on a deterioration in credit quality. In money markets, a closely watched indicator of credit risk in the U.S. banking system edged up on Monday. With investors worried about possible bank runs, the Federal Reserve on Sunday unveiled a new program to ensure banks can meet needs of all their depositors. "Hedge funds are probably the ones that are buyers in this case," said Dan Bruzzo, a strategist at Santander US Capital Markets. Other banks with California exposure were taking the brunt of the selloff in the debt capital markets, he added.

NEW YORK, March 13 (Reuters) - Credit risk indicators flashed red on Monday, as investors worried about contagion risks across corporate debt markets after the collapse of Silicon Valley Bank (SVB) and New York's Signature Bank in the space of 72 hours. Investment grade credit spreads, which indicate the premium investors demand to hold corporate bonds over safer government debt securities, have also been widening. The BlackRock Investment Institute said that after recently trimming its 'overweight' recommendation for investment grade credit, it was reassessing its view due to tighter financial conditions. In money markets, a closely watched indicator of credit risk in the U.S. banking system edged up on Monday. Other banks with California exposure were taking the brunt of the sell-off in the debt capital markets, he added.

☆ US companies rush to issue corporate debt, busiest February ever
▼ + stars: | 2023-02-28 | by ( Matt Tracy | ) www.reuters.com time to read: +2 min

Companies have been rushing to issue bonds as yields spiked to touch new highs with the Federal Reserve looking to keep interest rates higher for longer. The average yield on U.S. investment grade bonds rose to 5.55% on Monday from just 4.94% on Feb. 1. "There's much more yield now to be had in corporates," said David del Vecchio, co-head of the U.S. investment grade corporate bond team at PGIM Fixed Income. Investors still had plenty of cash, despite the flurry of issuance, said Blair Shwedo, head of IG corporate bond trading at U.S. Bank. "With more volatility, you may see some short term negative returns but overall, we’re well positioned to have a very nice positive total return in investment grade credit in 2023," said Natalie Trevithick, head of investment grade credit strategy at investment management firm Payden & Rygel.

"Credit spreads have rallied across the board since the beginning of the year despite heavy (new bond) issuance and are at multi-month tights. This puts the credit market at odds with economic forecasts and the rates market," Barclays strategists said in a recent note. They said U.S. investment grade bonds rated BBB implied a 30% chance of recession, and CCC rated bonds implied a 35% chance. In the most bullish scenario, investment-grade bond spreads could tighten another 20 to 30 basis points, but they could widen much more if the economic downturn is deeper than anticipated, he added. Reporting by Davide Barbuscia and Matt Tracy; Editing by Shankar Ramakrishnan and Andrea RicciOur Standards: The Thomson Reuters Trust Principles.

"From a markets perspective, you have to be cautious going forward," said Michael O'Rourke, chief market strategist at JonesTrading. "They're the biggest stocks in the market, and we really haven't had much of anything good come out of any of them." The Fed has already raised rates by 300 basis points this year as it fights the worst inflation in decades. "The big technology companies like Amazon continued hiring to support a business that looks like the year 2021, and it's not 2021. Despite the big stock price drops, some investors see more pain for the big tech-focused names.

☆ Weak Amazon outlook another blow to tech-type growth shares
▼ + stars: | 2022-10-27 | by ( ) www.reuters.com time to read: +7 min

But Apple earnings on Thursday were a bright spot, with higher than expected revenue leaving its shares (AAPL.O) only slightly lower. But then we look at the Apple report and they reported strong growth in a lot of their consumer categories. Going into the holiday season you would expect the consumer to really ramp up so that I see a big divergence between Apple and Amazon." What we saw in the past is that in a period of growth, tech really grew faster than anything else and got multiples that reflected that. There was always concern going into earnings, and quarter after quarter, they surprised to the upside.

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