Indebted companies and the rate-pause consensus
This week's chart covers the following topics:
Futures markets agree: the hiking cycle has ended (except in Japan)
Is the global interest-rate “pause” here? Communications from central banks are trending that way: Federal Reserve Governor Christopher Waller said policy is “well-positioned,” while Bundesbank President Joachim Nagel said the inflation outlook is “encouraging.”
Futures markets, meanwhile, are almost unanimous in suggesting we have seen our last rate hike.
This chart tracks various futures markets (SONIA, ESTR and Fed funds, for instance) to show the rate path priced in by different central banks. Not only is the current level seen as the peak rate in most cases, the long-awaited “pivot” to cuts is priced in for 2024 – something Nagel and others have signaled is too early to contemplate. (Interestingly, the Reserve Bank of Australia is seen as staying on hold for slightly longer than its peers.)
A simultaneous slump for Western sentiment and Chinese exports
We’ve previously written about China’s disappointing exports. This chart links that performance to worsening sentiment in the country’s predominant export markets.
We’ve created “Chinese Importer PMI” (the blue line, and the right-hand axis) by compiling purchasing managers index readings in China’s biggest markets: the US and the European Union (about 40 percent of the weighting when combined) but also Japan and the ASEAN nations. It also includes Hong Kong, which re-exports Chinese goods.
The PMI, a measure of sentiment among manufacturing executives, indicates contraction when it’s under 50 – where we are today. It has tracked the year-on-year rate of change in Chinese exports reasonably closely since the pandemic.
A corporate dashboard for debt-laden AT&T using FactSet
This chart uses data from FactSet via the FactSet Connector.
We’re returning to a theme: corporate debt burdens after the historic increase in borrowing costs.
The FactSet Connector simplifies the integration of comprehensive company, financial, and portfolio data into the Macrobond platform. We used it to highlight US telecoms giant AT&T in this dashboard, but it could be easily applied to many companies.
This heat map uses FactSet’s Fundamentals data to shed light on the evolution of AT&T ’s financial health across the last three years. It looks across four broad categories: Leverage (rows 1-4); debt-servicing capacity (rows 5-6); profitability (rows 7-8); and liquidity position (row 9).
The “heat” in the map describes how each quarterly observation ranks in the last five years of data for that metric. Broadly, AT&T’s leverage metrics have improved after flashing bright red two years ago.
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