The European credit indices widened slightly during last week as iTraxx Main ended at index 71 - up from 68 last week - and iTraxx Crossover widened some 15bp to 330 on the back of increased volatility in the equity market.
The main event this week will be the September FOMC meeting. Danske Bank's view is that the Fed will not raise the federal funds target range this year, in light of sluggish growth and continued labour market slack. For further information on our view please see 10 reasons why we believe the Fed will not hike this year , 14 September.
New data from BIS shows that more than 90% of the new issuance in Q2 16 from euro-area based non-financial companies was EUR-denominated. At the beginning of 2016 the number was close to 50%! The impact of ECB's decision to purchase EUR investment grade non-financial corporate bonds is clearly visible in the new issue market.
The direct impact on business activity following the British EU referendum has been fairly limited up until now. However, this week UK facility management company Mitie issued a significant profit warning that made its stock price decline some 25%. We cover some peer group companies like ISS (OW), G4S (CO:G4S) (MW) and Securitas (MW). We believe the Mitie profit warning is mainly related to Mitie's operations that have significant exposure to the UK public sector. However, we will monitor a potential worsening of general market conditions in the UK closely.
The weekly purchase volume continued to climb last week to a monthly run-rate of a substantial EUR11.7bn. This is the highest week so far. In total the ECB has now purchased bonds under the CSPP totalling EUR25.6bn.
To read the entire report Please click on the pdf File Below