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No Room For Disappointment

23 July 2019 by lberuti

The deal struck between the White House and Democratic party leaders to raise the US debt ceiling, a self-imposed arbitrary limit on the amount of sovereign debt the US can issue and a regular feature of Republican Party opposition to Barack Obama was the main news today. It was reportedly crafted by Democrat House speaker Nancy Pelosi and Treasury secretary Steve Mnuchin, and confirms the funding of the Government through to 2021, and well past the next 2020 election. But it was certainly not the reason for the further leg tighter took by credit risk premia across the board today. This leg tighter is down to the now extremely high expectations that investors have going into the ECB meeting on Thursday. Even though nothing material should be announced (no rate cut for now, no new purchase programme nor any change in the pricing of TLTRO for the moment), most hope that it will pave the way for those tools and they have been bracing themselves for such an outcome recently. Credit Financial indices (Senior and Subordinated) have massively outperformed all the others. They are both 5bps tighter over the last 5 sessions, and 12bps and 15bps tighter respectively over the last month. There is no room for disappointment in 48 hours.