MNI Credit Weekly: Overheating

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Executive Summary: 

• Spreads tightened 2bp this week and sit at the tightest levels since 3Q21, shrugging off tariff headlines. Complacent or not, the prevailing view is that the US administration is pragmatic; possible outcomes appear clearer than at the initial Liberation Day shock. Strong flows remain a big part of the story.
• In macro, market pricing of central bank policy was little changed. Longer rates were pressured by fiscal concerns.
• Fund Flows to EUR credit remained firm across both IG and HY, while USD credit inflows moderated. Equities had inflows across both the US and Europe ahead of earnings season.
• Supply saw subdued volumes with many issuers in blackout. Average books were again >4x while aggregate NICs remain tight. Volume expectations are also limited for next week.