Welcome to the end of the first quarter of 2012. Net-net, I think it was one of the better quarters we have experienced since 2007. Although US Treasury yields rallied slightly this week, overall, yields were higher for the quarter (the worst quarter for Treasuries since the fourth quarter of 2010), but for all the right reasons as the economic outlook for the US continues to brighten. The US equity markets performed very well this quarter (the best first quarter for equities since at least 1998) as money continued to move out of safety into riskier, but higher-yielding assets.
This week, the 2-year note yield was down 2bps to 33bps; the 5-year note was down 4bps to 1.04%; the 10-year note was down 2bps to 2.21%; and the 30-year bond was up 3bps to 3.34%. Looking at the entire first quarter, the 2-year note yield was up 9bps; the 5-year note was up 13bps; the 10-year note was up 21bps; and the 30-year bond was up 45bps.
US equity markets were up slightly this week. The Dow closed this week up +131.31 points at 13,212.04; the NASDAQ hit a new eleven-year high this week of 3,134.17 before falling, to finish the week at 3,091.57; and the S&P 500 peaked at 1,419.15 (a new four-yield high) before dropping to 1,408.47.
We witnessed a record amount of corporate debt issued this quarter. World-wide, we saw the most corporate debt sold since the first quarter of 2009, while here in the US, we observed the most corporate debt issued ever in a first quarter (breaking the record set in the first quarter of 2011). World-wide we saw $1.14 trillion of debt issued, while in the US $427 billion of debt came to market. The fact that yields are near all-time lows on both an absolute and relative basis are bringing issuers out of the woodwork.
Leading the charge this week was LyondellBasell Industries with a two-tranche $3 billion transaction comprised of $2 billion of a 7-year note and $1 billion of a 12-year note. HSBC was also in the market with size, bringing a $2 billion 10-year note to market.
In Europe this week, the credit story was rather muted for the majors, while Portugal and Greece continue to be the most watched sovereigns, though they are moving in opposite directions. The Spanish 10-year note yield was rather unchanged this week being down -2bps to 5.35%; the Italian 10-year security crept up a little higher, +8bps, to close at 5.12%; the French 10-year Oat was slightly better, -6bps, as its yield dropped to 2.89%, while the 10-year German Bund improved by -8bps, driving its yield down to 1.79%.
Portugal and Greece took off in diametrically opposed directions, although by similar magnitudes this week. The Portuguese 10-year security rallied by more than 100bps for the second consecutive week, to drive the yield down to 11.53%. On the other hand, the Greek 10-year bond sold-off by more than 100bps for the second consecutive week, with its yield rising to 21.12%, a reflection of the market’s still great concern that a further restructuring or default is in the offering in the future.
The potential big news of the coming week will be Friday’s release of the monthly Employment reports. This report always has the possibility of being a market mover but the impact of March’s report may be magnified by the fact that many market participants will be out of the office due to the Good Friday holiday. The consensus is for non-farm payrolls to increase by +201k, while the unemployment rate is to remain unchanged at 8.3%.
Good luck to all as the second quarter of the year begins.
No comments:
Post a Comment