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Are They Listening?

15 January 2019 by lberuti

Banks kickstarted the US earning season. Today was JPM’s ( JPMorgan Chase & Co ) turn. During a call with analysts, Jamie Dimon, the CEO, warned that a prolonged government shutdown could completely stop economic growth in the US. That part did not really register with market participants who sent all risky assets roaring higher – credit was no exception with iTraxx Main and CDX IG both closing 1bp tighter -. Rather, they first focused on a rare miss in earnings - $1.98 per share against the $2.20 people were expecting – which were dragged down by a 16% decrease in bond trading to roughly $1.8Bln, the lowest since the financial crisis. It came right after C ( Citigroup Inc ) reported yesterday a steep decline in fixed income trading as the Fed raised rates and volatility spooked credit investors, which could be a worry for banks that rely more heavily on their investment banking division. It weighted on JPM’s risk premium that was indicated a few bps wider, but it was eventually caught by the general sentiment and finished 2bps tighter at 68bps. That said, since early October, it has almost doubled, and the widening trajectory has not been interrupted yet.