As June drew to a close, with equities selling off on fears of a second wave in China and increasing cases in the US and Germany, the new supply of investment-grade and high-yield corporate bonds was slowing down sharply, after the rush to issue into the great rally driven by central bank buying.
Analysts were sending notes of caution.
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Matthew James, |
Matthew James, head of global spread products research at Citi, told investors: “We remain positively inclined across spread products as we move into summer, given the tail-end of the QE wave. However, markets could get choppy as liquidity drops into the holidays.”
Suggesting that the surge of central bank liquidity has crested, James said: “We believe that investors should take advantage over the next few weeks to tidy up portfolios – lighten up on less-confident positions, bolster liquidity buffers and tactically add to core views.”
It’s not just overall credit spreads that have been extraordinarily volatile during the past four months.
