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: Towards a rapid return of Greek debt to investment grade

  • The Prime Minister has a good chance of obtaining an absolutemajority in the second round of the legislative elections on 25th June;
  • He will thus continue the reforms and investments necessary to benefit from Next Generation EU funds;
  • Sustained growth, fiscal prudence and the very long maturity of sovereign debt bode well for the continued fall in the public debt-to GDP ratio;
  • This suggests a rapid return of Greek debt to investment grade. Investors have begun to position themselves in this direction. Moody's will speak on June 9.

Market review:  Tensions ease on markets

  • Disinflation quickens in Europe;
  • Solid job gains in the US;
  • 10-Yr note yields rally to 3.60% before a late sell-off on Friday;
  • Stocks rally late last week with VIX plunging below 15%.

Axel Botte's and Aline Goupil-Raguénès's podcast

  • Review of the week
  • Towards a rapid return of Greek debt in quality investment category

Chart of the week

msci-em-fx-index-and-used-cny-inverted

The US equity market remains driven by the theme of artificial intelligence.The FANG index, which includes 10 leading stocks in the sector, has risen 64% since the start of the year. The broad S&P 500 index gained nearly 10% thanks to the contribution of these mega-cap stocks when in reality most stocks did not show any gain this year. Bear in mind that concentrated performance on a few stocks could spark market sell-off in the event of disappointment in US tech.

Figure of the week

For every dollar invested in fossil fuels, $1.70 now goes to clean energy technologies. Five years ago that ratio was 1:1.

MyStratWeekly : Market views and strategy

Download MyStratWeekly – June 6th 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