Markets ending the week on a cautious note

With the US markets closed for Thanksgiving yesterday, markets were quiet with little movements across the board. In the Asian markets, the mood seemed to be mixed as China’s industrial profits rose to its fastest monthly pace in almost nine years in October which is a further sign that the economic recovery is gathering pace in the world’s second largest economy. On the equities front, Shanghai Composite grew 0.2% and Nikkei rose 0.9%, DAX was marginally flat, while FTSE 100 slipped 0.4%. Brent was one of the bigger movers, falling 1.7% to $47.7/b levels, as the uncertainty arose around whether the OPEC+ will be able to agree on an extension to the production cuts in the next meeting as well as the tensions over their plan to raise production in January. USTs are opening tighter this morning with 30Y yield down 2.5 bps to 1.595% area.

In Europe, we had ECB minutes published yesterday for the meeting at the end of October. The minutes in general reiterated the forward guidance voiced by Lagarde at the meeting the bank will stick to TLTROs and PEPP programmes as monetary tools. It was noted, however, that additional asset purchases might not have the same impact on financial conditions and economic activity as they had earlier in the year, given that markets had already stabilized since their introduction in March.  German bunds continued to rally yesterday with 10Y yield tightening 2.5bps to -0.585% levels. EU Periphery also followed the moves. Long BTPS tightened 2bps to 1.42%, SPGB 48s lost 3bps to 0.8% levels, while GGB remained unchanged on the day, underperforming.

MENA region was relatively quiet yesterday, with both HY and IG marginally unchanged to a touch wider (EGYPT the underperformer, down 50c in cash price). Interesting to note, we continue to see a buying interest in Qatari fins with a particular interest in ABQKQD. ABQKQD 25 was seen lifted at 99.375 by multiple buyers. Some news out of Turkey, with the central bank raising some reserve requirement ratios that lenders are required to hold for Turkish lira and foreign-currency accounts. TRY reacted positively, trading up 1% this morning. Sovereign bonds continued to slide however after the rally earlier this month with Turley 47 down 50c yesterday.

IN CIS, UKRAIN Warrants continue to outperform, remaining very much in demand with 99/100 mkt, as a proxy for 2021 growth post positive vaccine news. The rest of the curve was weaker with UKRAIN 30 EUR down 30-50c to low 93 levels. The rest of the market was marginally flat with RUSSIA 47 trading at low 136 area and KAZAKS 45 at 162 levels. The recently issued UZBEK 30 continues to trade strong, up more that a point to mid-101 levels. Buyers were also visible in the Uzbeki bank bonds with NBUZB 25 bid at 100.6 this morning.

SSA seemingly looking to have taken a breather, maybe an end to the one-way November we have experienced. Even though the oil rally has stalled amid OPEC+ tensions over production plans, SSA HY looks to be faring much better when compared to other patches of EM HY, up to +0.75pts higher across the board.