MNI EU Credit Weekly: Anti Climax

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Executive Summary: 

• Spreads were little changed on the week, despite some widening pressure Friday. A rare USD pulled deal from DXC added to macro driven defensiveness. Our US team noted issuer-specific challenges, suggesting the issue should not be systemic. Nonetheless, this episode adds to the popular “cockroaches” narrative.
• Optimism following the US government reopening failed to hold macro firm. As we await the data catch up, hawkish rhetoric pressured UST yields. The week finished on with a risk off tone with fears over stretched tech valuations growing.
• Fund flows increased in EUR IG while moderating in USD. HY remained weak in both regions even in the face of continuing equity inflows.
• Supply eased but was still elevated compared to October. Books were weaker on aggregate though the average NIC fell to 1bp. Expectations are for comparable corps/fins supply next week.