Read our market review and find out all about our theme of the week in MyStratWeekly and its podcast with our experts Axel Botte, Aline Goupil-Raguénès and Zouhoure Bousbih.

Topic of the week: Impact of TLTRO redemptions on markets

  • On June 28, European banks repaid 477 billion euros of TLTRO;
  • The high excess liquidity and the early repayments made allowed the markets to perform well;
  • Some tensions have however occurred on the money market;
  • For the next repayments, the focus will be on Italian banks due to insufficient excess liquidity;
  • They will have to resort to ECB loan facilities, borrow on the markets or reduce the size of their assets to make future repayments.

Market review: Commodity prices bounce

  • Disinflation faced with a rebound in commodity prices;
  • T-note yields rise back towards 3.85% ahead of the FOMC;
  • Nasdaq index reshuffling sparks profit-taking on FAANG stocks;
  • BTP spreads narrow as UE agrees to pay aid tranche to Italy.

Axel Botte's and Aline Goupil-Raguénès' podcast

  • Topic of the Week: UK inflation, food prices and Central Banks this week;
  • Theme: Impact of TLTRO repayments on markets.

Chart of the week

commodity-research-bureau-bls-us-spot-foodstuff-us-dollar

The price of foodstuffs listed on the markets has shown a sharp rebound since the beginning of June, returning to the levels of September 2022.

Russia pulled out of the agreement allowing wheat exports via the Black Sea, which contributed to a sharp rise in cereal prices. Moreover, the resurgence of the El Nino climatic phenomenon risks disrupting agricultural production in South America, which induces an additional upside risk. India has also intervened to limit its rice exports.

These new tensions could lead to a rise in food prices for consumers within a year.

Figure of the week

18 days: this is the time it takes to sell an old house in the United States given the low stocks available. The deadline was 30 days in January 2023.

MyStratWeekly : Market views and strategy

Download MyStratWeekly – July 25th 2023
  • Axel Botte

    Axel Botte

    Head of markets strategy

  • Zouhoure Bousbih

    Zouhoure Bousbih

    Emerging countries strategist

  • Aline Goupil-Raguénès

    Aline Goupil-Raguénès

    Developed countries strategist

Reading time : 30 min.
INSIGHTS MARKETS
The fixed income bond market is comprised of different types of debt. Subordinated debt sits at the lower end of the debt stack, just before equity. In case of a default, repayment of subordinated debt will come after the other bond tranches.  This implies that subordinated debt bears a higher risk for investors. Therefore, in return, subordinated debt bonds compensate investors with higher yields. As a result, the asset class offers a compromise in terms of risk and returns, positioning it in the middle of the capital structure, just between equities and senior bond tranches. European banks represent the largest sub-segment of the subordinated debt asset class. This is related to the regulatory framework and its stringent rules in terms of bank capital requirements. Issuing subordinated debt allows banks to increase their capital ratios while at the same time it serves to strengthen their creditworthiness. In 2023, after a turbulent month of March, the subordinated debt market has moved back in the spotlight. The asset class’s valuations have improved, offering an opportunity to gain access to higher yields from subordinated bonds issued generally by investment grade quality signatures. The subordinated debt market is characterised by a strong “euro” bias, resulting from technical factors (European regulatory framework) that favour issuance versus issuing equity to strengthen capital structures. According to Ostrum Asset Management (Ostrum AM), subordinated debt is an instrument which can be used to diversify fixed-income allocations, offering additional yield pick-up. And it can add value to responsible bond allocation as the sustainable subordinated bond market is developing.
10/03/2023
Reserved for pros
Podcast
Reading time : 30 min.
NEWS MARKETS
Read our market review and find out all about our theme of the week in MyStratWeekly and its podcast with our experts Axel Botte, Aline Goupil-Raguénès and Zouhoure Bousbih.
09/08/2023
Reserved for pros
Podcast
Reading time : 30 min.
NEWS MARKETS
Read our market review and find out all about our theme of the week in MyStratWeekly and its podcast with our experts Axel Botte, Aline Goupil-Raguénès and Zouhoure Bousbih.
09/08/2023
Reserved for pros