October 14, 2022
Fixed Income Solutions
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Market Wrap
The week ended?October 14, 2022
With the continuing deterioration in global conditions, it proved yet another volatile week for global assets.
What moved markets?
U.S equities saw wild swings in trading on Thursday, post-CPI release. Upon opening the S&P500 had fallen approximately 2.40% in response to the reading, however, closed the session 2.60% higher; an intraday move of over 5.00%. Even with these staggering moves, over the week, global equity markets closed out predominantly lower. The Dow Jones was an exception.
Bond yields climbed. The yield on the U.S 10-year treasury bond surpassed 4.00% for the first time since October 2008. The yield curve remains firmly inverted, with the 2-year treasury yield breaching 4.50%, its highest since 2007.
Australian corporate credit spreads have widened dramatically since our last update, although in our observations, they still lag behind their international counterparts.
In currency, strength remains in the US Dollar. The U.S Dollar Index (DXY) was up 0.45% for the week, while the AUD was significantly weaker, falling from an opening high of 0.637 to 0.620, a decline of 2.70%.
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News and Data
United States
As reported above, U.S CPI rose by 0.40% in September, driven by food, shelter, and medical care, while over the prior 12 months, the index increased by 8.20%. Core CPI, excluding food and energy, rose 0.60%, as it did in August.
Retail sales stalled in September as figures showed that shoppers refrained from spending amid a worsening inflationary and interest rate environment.
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United Kingdom
Kwasi Kwarteng survived only 38 days as the UK Chancellor, after a disastrous month on the job. The former Chancellor’s proposed mini-budget was bold and spooked markets, creating chaos across UK financial markets. The BOE had to intervene, stepping in by purchasing gilts to create short-term stability and protect the potential collapse of many large pension funds. The bond-buying intervention program finished on Friday, but not before confusion and unclear messages sent from the BOE created further uncertainty across markets, sending gilt yields higher and the GBP crashing. It seems the reputation of both the UK government and BOE has been heavily tarnished.
PM Liz Truss has since backflipped on the proposed mini-budget, in an attempt to stabilise UK markets and protect her job, at least for the near term.
The Week Ahead
Key Events
Bond Offers
We have a variety of bonds being bid and offered, please get in touch with a BGC fixed income representative if you have any interest or would like to know more.
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