Underperformance of US credits & low-betas (swap spread effect again)

Swap spread compression and the fading Trump trade Another week of swap spread compression to record levels ( -6 pb on the 10Y, +3 bp on the 5Y, i.e 4 bp weekly compression) has weighed on € low-beta credit spreads again : +4 bp vs swap for € Corp non-financial senior, +3 bp for € Covered bonds, +2 bp for € bank senior iBoxx indices As the Trump trade has faded, the assets having benefited the most from it the 1 st week after the US election were the ones to suffer last week too: + 12 bp for US HY spreads, +5 bp for US IG , all the more as net weekly outflows were seen on US IG Credit funds ($440mn) . On derivatives too, US credits underperformed their € counterparts last week (+2.5 for CDX NA IG, +1.7 bp for the iTraxx Main) . Sector-wise, Autos underperformed a bit last week, mainly on the back of secondary repricing after the successful deals from VW , Stellantis and RCI last week (4.3x oversubscribed on average, -2bp vs reoffer spread, but triggering 2ndary repricing mainly on Stellantis and RCI curves) . Overall, the €18bn supply seen in corporates last week was well absorbed (3.7x average oversubscription rate) but also explains partly the 4 bp widening seen at the index level on the back of some secondary repricing (heavier on EnBW, Equinix secondary curves). REITs were again the main outperformer , with only 2.5bp widening vs swap last week and an outstanding resilience vs other sectors on a monthly basis (see chart opposite). The 2 new deals (CTP, WP Carey) triggered less secondary repricing (2bp) than the average corporate (4bp)