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: Summer highlights

  • The fall in surveys foreshadows a weakening of growth in the euro area;
  • However, inflation remains high in the euro area;
  • Some tensions have however occurred on the money market;
  • Activity slowed in China. The real estate crisis and the sluggishness of the labor market are weighing on domestic demand;
  • Financial risks are taken into account by the Chinese authorities with measures targeting mortgages and LGFVs;
  • Jackson Hole reflects the anxiety of the Fed and the ECB about the mechanism of price formation and medium-term inflation risks;
  • The rise in interest rates in August led to profit taking on risky assets. Equities nevertheless rebounded from mid-August.
  • The dollar benefited from the rebound in the 10-year T-note to 4%. The yen and the euro retreated.

Market review: Conflicting signals

  • Poor PMI readings in Europe as inflation stays elevated (5.3%);
  • US: 187k payroll gain but unemployment up to 3.8%;
  • Yield curve steepening continues;
  • Stocks rebound as primary market activity heats up in credit.

Chart of the week

brent oil price and saudi arabia exports

The price of oil has resumed its upward path since the beginning of the summer to approach $88 per barrel of Brent.

OPEC+ is still pursuing a high-price strategy as Saudi Arabia oil exports have plunged to levels last seen in the covid recession. Meanwhile, oil production in the United States seems to be stagnating at 12.4 million barrels per day.

The rebound in oil in the context of Chinese consumer weakness may add to upside risks to inflation in the years to come.

Figure of the week

1,400

This is the amount in billions of dollars of fossil fuel subsidies at the G20 level in 2022. This amounts to 2.5 times the 2019 total.

MyStratWeekly : Market views and strategy

Download MyStratWeekly – September 8th 2023

Listen to the podcast (in french only)

  • 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