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<\/p>\nOctober was marked by several events. A partial US-Chinese trade agreement<\/b> along with a delay to <\/b>Brexit<\/b> until 31 January 2020 drove sovereign yields sharply higher<\/b> and risk <\/b>premia<\/b> lower<\/b>.<\/p>\n
After lowering benchmark rates by 25\u00a0bps for a third and final time, the US Fed<\/b> announced its monetary policy was now \u2018on hold\u2019.<\/p>\n
In light of this, risk premia narrowed across all fixed income asset classes apart from those for High Yield. Third-quarter corporate earnings have been mixed and business leaders are sounding a lot more cautious. With yields moving higher, only the riskiest assets (subordinated and emerging debt<\/b>) put in positive performances<\/b>.<\/p>\n
<\/p>\n
October remained a busy month in the primary market for corporate Investment Grade names, with volumes reaching \u20ac34\u00a0billion, up 26% compared with October 2018. Daimler, Pernod, SES, Alstom, Eni, <\/b>Icade<\/b> Sant\u00e9, <\/b>Unibail<\/b> Rodamco<\/b> Westfield, CK Hutchinson, Carnival, E.ON, <\/b>Engie<\/b>, Enel and Suez<\/b> all came to market with senior debt and green debt offerings, some of which were multi-tranche. In terms of hybrid issues, two names stood out: Accor<\/b> (with an issue including a repurchase of its 2020 hybrid call security) and KPN<\/b>.<\/p>\n
In financial names, Tier 2 issues dominated the primary market (including Abanca<\/b>, Bank of Ireland, BPM, and <\/b>Generali<\/b>). Tier 1 saw La <\/b>Mondiale<\/b> issue its first RT1 (Solvency 2 compliant), while the AT1 segment welcomed issuance from AIB<\/b>, which refinanced a scheduled 2020 call, and two first-time issues from My Money Bank<\/b> and LBBW<\/b>. On senior non-preferred notes, the secondary market remained very active throughout the month.<\/p>\n
The earnings season has delivered a mixed bag with some names applauded (Kl\u00e9pierre<\/b>, KPN<\/b> and Ipsos<\/b>) and others booed, namely Nokia, which revised its outlook steeply downwards. Several profit warnings were announced, including Imerys<\/b> (placed on credit watch by Moody\u2019s) and RCI <\/b>Banque<\/b> (driven by a profit warning from Renault).<\/p>\n
Although S&P upgraded Greece<\/b> to BB- with a positive outlook, it did not adjust any bank ratings. First indications of third-quarter banking earnings have not thrown up any negative surprises with margins generally appearing to stabilise and cost of risk remaining low.<\/p>\n
With primary market issuance volumes very high (over \u20ac10\u00a0billion) during the month, high yield<\/b> continued to consolidate. Individual bouts of bad news tarnished performance across the single-B segment.<\/p>\n
Sector disparities in terms of performance resurfaced in October with good performances made in some, including Healthcare<\/b> (Teva<\/b> rose on the back of its proposal for a payment in kind in order to clear itself of looming opioid litigation cases), Energy<\/b>, and Leisure<\/b>. Jaguar<\/b> featured among the best performers as it enjoyed sharply improved earnings. The fact that its shareholder, Tata Motors, recently raised funds through the equity market has also reassured investors over Tata\u2019s ability to support the luxury brand.<\/p>\n
The sectors that suffered most included Services<\/b> (Europcar<\/b> struggled following a serious profit warning due to Brexit and a bleaker European economy), Consumer Goods and Transport<\/b> (CMA, CGM). Month-end saw Casino<\/b> faltering as it announced debt refinancing plans that included a secured bond issue.<\/p>\n <\/p>\n The information provided is not intended to constitute investment advice and is for information purposes only. Data used in this paper is used in good faith but no reliance may be placed on it. All data contained herein is sourced by Lazard unless otherwise noted.<\/span><\/p>\n Past performance is not a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and you may not get back the amount you invested.<\/span><\/p>\n FOR FINANCIAL PROFESSIONAL USE ONLY. Fixed income: Yields from bonds reflect in part the risk rating of the bond issuer. Investment in lower rated bonds increases the risk of default on repayment and the risk to capital of the portfolio. High yielding assets may carry a greater risk of capital values falling or have limited prospects of capital growth or recovery. Investment in high yield securities involves a high degree of risk to both capital and income. Yields from bonds reflect in part the risk rating of the bond issuer. Investment in lower rated bonds increases the risk of default on repayment and the risk to capital of the portfolio.<\/span><\/p>\n S&P Credit Ratings: This may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor\u2019s. Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. Third party content providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use. Third party content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs or losses caused by negligence) in connection with any use of their content including ratings. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.<\/span><\/p>\n United Kingdom, Finland, Ireland, Denmark, Norway and Sweden: The information is approved, on behalf of Lazard Fund Managers (Ireland) Limited, by Lazard Asset Management Limited, 50 Stratton Street, London W1J 8LL. Incorporated in England and Wales, registered number 525667. Lazard Asset Management Limited is authorised and regulated by the Financial Conduct Authority.<\/span><\/p>\n Germany and Austria: Lazard Asset Management (Deutschland) GmbH, Neue Mainzer Strasse 75, 60311 Frankfurt am Main is authorized and regulated in Germany by the BaFin.<\/span><\/p>\n Belgium and Luxembourg: This information is provided by the Belgian Branch of Lazard Fund Managers Ireland Limited, at Blue Tower Louise, Avenue Louise 326, Brussels, 1050 Belgium.<\/span><\/p>\n France: This information is provided by Lazard Fr\u00e8res Gestion SAS , 25, rue de Courcelles 75 008 Paris.<\/span><\/p>\n Italy: This information is provided by the Italian branch of Lazard Asset Management (Deutschland) GmbH. Lazard Asset Management (Deutschland) GmbH Milano Office, Via Dell’Orso 2 – 20121 Milan is authorized and regulated in Germany by the BaFin.<\/span><\/p>\n Netherlands: This information is provided by the Dutch Branch of Lazard Fund Managers (Ireland) Limited, which is registered in the Dutch register held with the Dutch Authority for the Financial Markets (Autoriteit Financi\u00eble Markten).<\/span><\/p>\n Spain and Portugal: This information is provided by the Spanish Branch of Lazard Fund Managers Ireland Limited, at Paseo de la Castellana 140, Piso 100, Letra E, 28046 Madrid and registered with the National Securities Market Commission (Comisi\u00f3n Nacional del Mercado de Valores or CNMV) under registration number 18.<\/span><\/p>\n Andorra:\u00a0 For Andorran licensed financial entities only. This information is provided by the Spanish Branch of Lazard Fund Managers Ireland Limited, at Paseo de la Castellana 140, Piso 100, Letra E, 28046 Madrid and registered with the National Securities Market Commission (Comisi\u00f3n Nacional del Mercado de Valores or CNMV) under registration number 18. This information is approved by Lazard Asset Management Limited (LAML). LAML is not regulated or authorised by or registered in the official registers of the Andorran regulator (AFA).<\/span><\/p>\n Switzerland: Lazard Asset Management Schweiz AG, Usteristra\u00dfe 9, CH-8001 Zurich. Authorised and regulated in Switzerland by the FINMA.<\/span><\/p>\n The information provided herein should not be considered a recommendation or solicitation to purchase, retain or sell any particular security. It should also not be assumed that any investment in these securities was or will be profitable.<\/span><\/p>\n Completed on 15 November 2019.<\/span><\/p>\n The opinions expressed are up-to-date at the time of writing and are liable to change.<\/span><\/p>\n For professional investors only (as defined by MIFID)<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" October was marked by several events. A partial US-Chinese trade agreement along with a delay to Brexit until 31 January 2020 drove sovereign yields sharply higher and risk premia lower.<\/p>\n","protected":false},"author":101016,"featured_media":10985,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[99],"tags":[],"class_list":["post-12443","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-expertise-en"],"yoast_head":"\nOutlook<\/h1>\n
Market Backdrop<\/i><\/h2>\n
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Positioning<\/i><\/h2>\n
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