The US Congress finally agreed on a USD2tn stimulus package, set out to combat Covid-19; US equity markets benefited from the more positive news. However, this morning, the futures market has erased any gains. The fiscal package will have to pass a Senate vote today and get final approval from the House, so markets are on tenterhooks. We await further progress and details on the package, as apart from the enormity of it there is little clarity on what industry/sectors will be supported, let alone how it will be funded and the longer term consequences of the bazooka on the US economy post-coronavirus crisis. Of note, the semi coordinated developed economy fiscal packages have lent support to emerging market sentiment.
Elsewhere, following the declaration of a state emergency, Spain yesterday issued a EUR 10bn seven-year bond, which was 3.6 times oversubscribed. The bond was issued at a 0.8% coupon, 18 basis points higher than the current equivalent; such a large deal required an attractive yield. This is not something we would look to hold despite the relative high credit rating; the bond is currently trading ‘expensively’ according to our RVM calculations at -2.9 notches.
Yesterday was one of the busiest days in terms of new issues; new deals this week have already beaten the volumes issued in the first three weeks of the month and we expect issuance globally to ramp up today and into the end of the week. We will keep a constant eye out for any new attractive deals and of course continue to monitor our portfolios as the fiscal bazookas are released.