Weekly Market Recap – June 13th

The material in each presentation has been prepared by the respective participant for informational purposes only, and does not, nor does it intend to, provide tax, legal, accounting, or investment advice. This information is of a general nature and does not address the circumstances of any particular individual or entity. You should consult a qualified advisor on your situation to answer specific questions.

Tracking inflation in the U.S.

Consumer-price growth accelerated in most US regions last month, with the notable exception of the Mountain states, where inflation remained elevated but slowed down from the aggressive pace that engulfed the area earlier this year, Labor Department data showed Friday. Nationwide the consumer-price index reached a fresh 40-year high, increasing 8.6% from a year earlier. Inflation in West South-Central region, which includes Texas, reached a historical high — accelerating to 9.9% from 9.3% in April.

Sourcre: Bureau of Labor Statistics, Bloomberg

More China Defaults Ahead?

The default rate of China overseas bonds, already at a record 4.7%, is set to worsen with 15 issuers facing payment pressure.

Most credit events in China in the past year have been among property developers, with Kaisa being the largest defaulting issuer in the offshore market, followed by China Evergrande. The real estate sector’s default rate may deteriorate further with the relaxation of restrictions on developers’ cash holdings.

Source: Bloomberg

European High Yield Still Under Stress

Cracks are running deep in European debt markets as companies face record-high inflation and exposure to Russia and Ukraine. More than a third of the bonds are now trading at less than 90 cents. Fixed Income strategists expect the default rate for European high-yield issuers to reach 3.8% by the end of 2023 and peak at 6.6% in 2024.

Source: Bloomberg

Tracking Fixed Income Flows

There were record inflows to fixed-income ETFs in May across a range of segments as economic fears spurred a broad bond rally.

Exchange-traded funds tracking government debt lured $18.7 billion with muni products adding $6.1 billion. Almost $7.2 billion poured into ultra- short duration funds and short duration ETFs scooped up $9.4 billion. All were new monthly records.

Source: Bloomberg

VIX Rises with Inflation Print

Equity volatility made a reappearance late in the week with CPI’s publication showing an 8.6% increase. Investors are continuously worried that the Federal Reserve is doing too little too late to keep prices under control.

Indices fell more than 2% on Thursday and Friday with little signs of buyers.

Source: Bloomberg

Tracking Relative Performance (YTD)

Source: Bloomberg