Keeping Up the Pace

As stock investors worry about the US fiscal cliff, Greece and the same old headlines, Corporate Credit remains the outperformer. Credit investors had a good run this year and many would love to call it a day and close off their books for the year. Yet, things look bright for this asset class going to next year and while many are tempted to take profits, a strategy to pick paper at better levels in Q1 of next year may not be a wise idea. Obviously, the debate continues. For the time being, not many analysts are predicting a reallocation out of credit into equities for the foreseeable future. Equities are simply too volatile.

A case in point is how the S&P index has been falling over the past eight sessions while credit has remained relatively stable.

US Treasuries fell today for the first time since U.S. President Barack Obama’s re-election on the eve that the President will meet congress to discuss the now looming Fiscal cliff.

US company credit swaps were little unchanged, despite the news that Europe is now officially in a recession. In the last quarter GDP in Europe contracted by 0.1%, following a previous drop of 0.2% in the previous three months.

Yields on Japan’s 10 year benchmark bonds fell to lowest level since July on renewed optimism that the opposition party in Japan will come to power. This party is in favour of aggressive monetary easing in order to boost the economy.