MNI EU Credit Weekly: Supply Surge

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Executive Summary: 

• Spreads were unchanged in aggregate this week. Real Estate (+3) was a marginal outlier, with sector dispersion generally low. Risk sentiment recovered slightly following last week’s French political news, helping Financials (-2). Ongoing supply including a new daily record capped performance in cash overall.
• Soft labour data set the macro tone, driving a reversal in DM rates from earlier in the week. Implied Fed cuts moved 15bp, with 70bp reduction priced for the rest of the year.
• Looking ahead, US CPI data on Thursday will be pivotal with the FOMC meeting coming the week after.
• Fund Flows remained positive in IG credit. European equities reversed to inflows and US equity inflow strength continued.
• Supply was lower but still strong with close to €14bn priced and average NICs wider for a sixth consecutive week. A similar amount is expected next week.