Marketing Communication
Euro Corporate Weekly Meltdown of total returns
Group Economics Macro & Financial Markets Research Hyung-Ja de Zeeuw +31 20 628 3551 Hyung-ja.de.zeeuw@nl.abnamro.com
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08 May 2015
Correction in Bunds crushed total returns in credit Total return for Non-Financials senior went back to square one Total returns of AA and A rated credit paper dive into negative territory Credit spreads remained very resilient amid market turmoil With a beat:miss ratio of 5:3, results remain better than expected
Correction in Bunds crushed total returns in credit
Table 1 - iBoxx EUR IG Total return
The correction in the Bund that started in the second half of April has had a devastating impact on total returns. On 17
Total Return
YTD
chg. week
chg. month
April, total return for Non-Financials senior category reached
Corporates
0.14%
-0.73%
-1.33%
its highest year to date level, of 1.93%. Yesterday end of day,
Non-Financials
0.05%
-0.85%
-1.54%
total return had slumped to -0.03%. All return lost in just three
Non-Financials Sr.
-0.03%
-0.82%
-1.53%
weeks.
Non-Fins Sub
1.72%
-1.22%
-1.62%
Non-Fins AA
-0.17%
-1.03%
-1.90%
Non-Fins A
-0.18%
-0.87%
-1.60%
Non-Fins BBB
0.27%
-0.79%
-1.41%
Total return fell off a cliff In %
2.5
Source: ABN AMRO Group Economics, Markit
2.0 1.5
Credit spreads remained resilient in volatile markets
1.0
The recent volatility in the Bund reached levels we haven’t seen before. The intraday move of 19bps from peak to trough
0.5
in the 10 year Bund on Thursday was unprecedented. Equity
0.0
indices also lost ground during the day, only to recover in the afternoon.
-0.5 Jan
Feb
Mar
Apr
May
Non-Fins sr
Against this backdrop, cash credit spreads remain remarkably resilient. Spreads are more or less unchanged on the week. A
Source: ABN AMRO Group Economics, Markit
very strong performance in such a volatile market environment. Last week, we had a very similar picture with choppy equity
But things are even worse for higher rated paper. The Bund
and Bund markets and spreads grinding tighter.
selloff caused total returns of AA and A rated paper to dive into double digit negative territory this week. Only the BBB rated
The main reason for the resilient performance is that both
category and subordinate paper managed to stay total return
investors and issuers remain side lined. We haven’t seen any
positive. Only here the carry was high enough to form a buffer
meaningful flows in Non-Financials. There weren’t any bottom
to absorb the fierce movement in Bunds.
fishers nor panic sellers in the market.
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