Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Stronger than expected US employment data combined with uncertainty surrounding the Fed’s next steps to drive broader credit markets wider by weekend, although financials remained better bid. Taperless tantrums may be repeated over the near term but financials may be less impacted.While US CCC-rated bonds and Asia High Yield sold-off, almost all European contingent capital and Asia High Yield bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Investors grabbed longer duration Additional Tier 1 (AT1) bonds as the week progressed, on economic strength expectations, while lower duration Senior Unsecured bonds outperformed on rising interest rate expectations. Friday’s non-farm report generated concerns on European growth in a rising rate environment. Queue central bank assurances that they will respond to rising rates over the next few weeks.Despite higher spreads available in more moderate duration AT1 notes, Europe's outperformers were almost exclusively long duration bonds. This outperformance is a very bullish signal. However, we are not convinced that this should apply to each of these institutions.  Please see <a href="https://www.smartkarma.com/insights/credit-suisse-greensill-sows-reputation-risks-underweight-cs-bonds" target="_blank" data-smartkarma-citation="insights:48839" rel="noopener">Credit Suisse: Greensill Sows Reputation Risks, Underweight CS Bonds</a> for further details.Financials remain the sweet spot in Asia credit. Levered to the economy and rising rates, this is the place to be at this point in the market cycle.  Performance attributes varied amongst the various bank credit classes in Asia. Risk-on sentiment drove higher risk AT1 and less subordinated Tier 2 bonds tighter. Meanwhile duration concerns drove investors to target higher spreads per unit of duration in BBB-rated and High Yield Senior Unsecured notes. Taken together, this performance outcome is likely evidence of the melt-up in spreads that we anticipated several weeks ago. Please see <a href="https://www.smartkarma.com/insights/bank-credit-strategy-melt-up-before-meltdown-where-to-position" target="_blank" data-smartkarma-citation="insights:48133" rel="noopener">Bank Credit Strategy: Melt-Up Before Meltdown, Where to Position</a> for more details.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Market Outlook: The Fed will likely Twist before it Tapers, but the timing of both remain uncertain as real long term interest rates remain negative. In the interim, global treasury markets may remain unsettled. The US economy may run very hot before we see a change in Fed policy regarding short-term interest rates and the US dollar should remain stronger than analysts forecasted at year-end. Broadly, this is not Emerging Market IEM) friendly; however, a strong US economic rebound should benefit EM and European financials. Short duration in investment grade financials combined with high credit spreads in High Yield financials and more subordinated debt may remain the way forward.

Stronger than expected US employment data combined with uncertainty surrounding the Fed’s next steps to drive broader credit markets wider by weekend, although financials remained better bid. Taperless tantrums may be repeated over the near term but financials may be less impacted.While US CCC-rated bonds and Asia High Yield sold-off, almost all European contingent capital and Asia High Yield bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Investors grabbed longer duration Additional Tier 1 (AT1) bonds as the week progressed, on economic strength expectations, while lower duration Senior Unsecured bonds outperformed on rising interest rate expectations. Friday’s non-farm report generated concerns on European growth in a rising rate environment. Queue central bank assurances that they will respond to rising rates over the next few weeks.Despite higher spreads available in more moderate duration AT1 notes, Europe's outperformers were almost exclusively long duration bonds. This outperformance is a very bullish signal. However, we are not convinced that this should apply to each of these institutions.  Please see Credit Suisse: Greensill Sows Reputation Risks, Underweight CS Bonds for further details.Financials remain the sweet spot in Asia credit. Levered to the economy and rising rates, this is the place to be at this point in the market cycle.  Performance attributes varied amongst the various bank credit classes in Asia. Risk-on sentiment drove higher risk AT1 and less subordinated Tier 2 bonds tighter. Meanwhile duration concerns drove investors to target higher spreads per unit of duration in BBB-rated and High Yield Senior Unsecured notes. Taken together, this performance outcome is likely evidence of the melt-up in spreads that we anticipated several weeks ago. Please see Bank Credit Strategy: Melt-Up Before Meltdown, Where to Position for more details.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Market Outlook: The Fed will likely Twist before it Tapers, but the timing of both remain uncertain as real long term interest rates remain negative. In the interim, global treasury markets may remain unsettled. The US economy may run very hot before we see a change in Fed policy regarding short-term interest rates and the US dollar should remain stronger than analysts forecasted at year-end. Broadly, this is not Emerging Market IEM) friendly; however, a strong US economic rebound should benefit EM and European financials. Short duration in investment grade financials combined with high credit spreads in High Yield financials and more subordinated debt may remain the way forward.

Bank Credit Weekly: One Size Does Not Fit All

Asia headquartered banks fared well despite the global tantrum without taper in the Treasury markets. Asia headquartered bond prices fell by less than their benchmark Treasury market notes, resulting in a bout of credit outperformance. Almost all bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Moderate duration, lower risk, bonds continued to outperform, although there were pockets of outperformance in China-headquartered Additional Tier 1 bonds.Bonds in the belly of the curve, that is those maturing or callable in five-years, outperformed longer dated notes. Moderate duration bonds led as investors lost faith in an inflation free economic recovery which would cap market rate rises. This is the opposite of last weeks’ performance, wherein even longer-duration note outperformed. That seemed odd given policymakers repeated statements that they would let the US economy run hot at the risk of stoking inflation. The rapid sell-off in US Treasuries during the week is evidence of market jitters regarding eventual inflation expectations.The pressure on U.S. Treasuries is largely in-line with what we have been cautioning on since the Senate run-off results in Georgia last month. Friday’s correction at the long end may be tested again.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Given the rate of change over the last two weeks, things are moving fast. We identify potential opportunities within. <a href="https://www.smartkarma.com/entities/state-bank-of-india" target="_blank" data-smartkarma-citation="entities:160:1" rel="noopener">State Bank of India (SBIN IN)</a> represents one credit curve where better opportunities exist in shorter duration bonds, however, <a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri (BMRI IJ)</a> may offer even better values, as we note within.Market Outlook: This week’s Treasury market tantrum was not induced by Fed tapering, but it is a reminder of what it may look like when the Fed does dial back its asset purchases. Combined with the strength of the risk-on moves, this makes us uneasy. Financial repression creates a market, which in its nature, is always a one-sided bet with the Fed / ECB/ BOJ.  There is limited price discover as the market is simply sentiment driven. Credit value should remain driven by larger market forces. However, we may be fast approaching a point where the market outpaces the rate of expected economic recovery, and / or the market outpaces the rate that can be achieved without incurring substantial financial stability concerns. Our preference is for lower duration bonds, preferably in the belly of the curve. Please see our recent <a href="https://www.smartkarma.com/insights/bank-macro-manifest-risk-rally-gathers-steam-as-bad-news-more-stimulus" target="_blank" rel="noopener">Bank Macro Manifest</a> and <a href="https://www.smartkarma.com/insights/bank-credit-strategy-melt-up-before-meltdown-where-to-position" target="_blank" rel="noopener">Bank Credit Strategy</a> notes for more details.

Asia headquartered banks fared well despite the global tantrum without taper in the Treasury markets. Asia headquartered bond prices fell by less than their benchmark Treasury market notes, resulting in a bout of credit outperformance. Almost all bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Moderate duration, lower risk, bonds continued to outperform, although there were pockets of outperformance in China-headquartered Additional Tier 1 bonds.Bonds in the belly of the curve, that is those maturing or callable in five-years, outperformed longer dated notes. Moderate duration bonds led as investors lost faith in an inflation free economic recovery which would cap market rate rises. This is the opposite of last weeks’ performance, wherein even longer-duration note outperformed. That seemed odd given policymakers repeated statements that they would let the US economy run hot at the risk of stoking inflation. The rapid sell-off in US Treasuries during the week is evidence of market jitters regarding eventual inflation expectations.The pressure on U.S. Treasuries is largely in-line with what we have been cautioning on since the Senate run-off results in Georgia last month. Friday’s correction at the long end may be tested again.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Given the rate of change over the last two weeks, things are moving fast. We identify potential opportunities within. State Bank of India (SBIN IN) represents one credit curve where better opportunities exist in shorter duration bonds, however, Bank Mandiri (BMRI IJ) may offer even better values, as we note within.Market Outlook: This week’s Treasury market tantrum was not induced by Fed tapering, but it is a reminder of what it may look like when the Fed does dial back its asset purchases. Combined with the strength of the risk-on moves, this makes us uneasy. Financial repression creates a market, which in its nature, is always a one-sided bet with the Fed / ECB/ BOJ.  There is limited price discover as the market is simply sentiment driven. Credit value should remain driven by larger market forces. However, we may be fast approaching a point where the market outpaces the rate of expected economic recovery, and / or the market outpaces the rate that can be achieved without incurring substantial financial stability concerns. Our preference is for lower duration bonds, preferably in the belly of the curve. Please see our recent Bank Macro Manifest and Bank Credit Strategy notes for more details.

Bank Credit Weekly: Asia Credit Outperforms Despite Treasury Tantrum

Real credit fundamentals have yet to catch-up with spreads in bonds which continue to outperform. True fundamentals have a considerable gap to close relative to spread compression. Global monetary accommodation is in large part responsible for recent outperformance. However, credit tourists may have booked too early.Deeply subordinated Additional Tier 1 (AT1) bonds led in terms of spread tightening during January in Asia. Increased risk tolerance and a reach for yield, possibly by credit tourists, drove results as global vaccination efforts raised economic growth expectations. As such, Hong Kong and Thai- based bank securities outperformed, albeit for differing reasons.As Asia-headquartered banks report earnings, the quality of disclosure varies considerably from bank-to-bank. Even where disclosure is adequate, asset quality indicators may greatly underestimate the level of troubled debt due to continued forbearance, restructuring efforts and early-stage aging. This is driving provisioning costs lower than would be expected in a more normal operating environment. The value of these reports is significantly diminished for credit investors. Financial repression creates a market, which in its nature, is always a one-sided bet with the Fed / ECB/ BOJ.  There is limited price discovery. As such, credit value should remain driven by larger market forces.In terms of economic growth, the IMF projects 11.5% and 8.1% GDP growth this year for India and China, respectively. The near-term future is South Asian, but this may not apply to all. Most India-headquartered banks already price-in considerable recovery prospects. However, significant bank recapitalized in needed for the economic forecasts to materialize and for these banks spreads to be maintained.Eventually, it will be time to deliver real fundamental performance. In the meantime, monetary accommodation should remain the main driver of credit spreads while economic growth plays catch-up. Credit tourists are fickle and may vacate if either are delayed.

Real credit fundamentals have yet to catch-up with spreads in bonds which continue to outperform. True fundamentals have a considerable gap to close relative to spread compression. Global monetary accommodation is in large part responsible for recent outperformance. However, credit tourists may have booked too early.Deeply subordinated Additional Tier 1 (AT1) bonds led in terms of spread tightening during January in Asia. Increased risk tolerance and a reach for yield, possibly by credit tourists, drove results as global vaccination efforts raised economic growth expectations. As such, Hong Kong and Thai- based bank securities outperformed, albeit for differing reasons.As Asia-headquartered banks report earnings, the quality of disclosure varies considerably from bank-to-bank. Even where disclosure is adequate, asset quality indicators may greatly underestimate the level of troubled debt due to continued forbearance, restructuring efforts and early-stage aging. This is driving provisioning costs lower than would be expected in a more normal operating environment. The value of these reports is significantly diminished for credit investors. Financial repression creates a market, which in its nature, is always a one-sided bet with the Fed / ECB/ BOJ.  There is limited price discovery. As such, credit value should remain driven by larger market forces.In terms of economic growth, the IMF projects 11.5% and 8.1% GDP growth this year for India and China, respectively. The near-term future is South Asian, but this may not apply to all. Most India-headquartered banks already price-in considerable recovery prospects. However, significant bank recapitalized in needed for the economic forecasts to materialize and for these banks spreads to be maintained.Eventually, it will be time to deliver real fundamental performance. In the meantime, monetary accommodation should remain the main driver of credit spreads while economic growth plays catch-up. Credit tourists are fickle and may vacate if either are delayed.

Bank Credit Compass: Credit Tourist May Vacate if Real Fundamentals Do Not Catch-Up

A pack of small, but smart, investors in a free and open market caught hedge funds off guard this week. The hunter was hunted, and the resulting equity market volatility drove financial concerns more than financial conditions. The GameStop situation is noise and not a signal for risk assets. For a nasty global risk asset unwind, there needs to be a catalyst in the form of either an economic downturn or a material tightening in Fed policy. Neither is in play. Weakness in Asia High Yield this week may create opportunities.More importantly, for credit investors, short-term Libor levels hit record lows on Friday. This matters as investors that focus on high-quality short-term securities may be pushed into commercial paper or other very short-duration paper. The rate curve should bull steepening from the excess amount of cash in the market. The flood of cash could drive credit yields even lower.In this environment, U.S. CCC-rated and Asia High Yield index spreads widened.  More and more brokerage houses are recommending Asia High Yield as the place to be in 2021, despite property developer concerns in China. Our take is that fundamentals have yet to catch-up with spreads in the US CCC-rated area although we suspect that they may. However, US High Yield has a higher effective duration now, versus pre-Covid, and versus Asia High Yield. As such US High Yield credits have more limited upside in the reflation scenario. A delay in the reflation scenario should benefit Asia-headquartered risk assets.At the same time, ivory-tower syndrome has taken over the Fed. Chairman Powell’s comments this week that what is really driving asset prices is not monetary policy, suggests that the disconcerting disconnect between financial and economic conditions is not understood by senior policymakers. If the Chairman’s comments were true, then there would be no need to signal a tapering of asset purchases well in advance. Whether you call it price fixing or price guidance by the Fed and ECB policymakers, it does not matter as you cannot fight it. The Fear of Missing Out (FOMO) is real in the credit markets.Despite these challenges, Asia’s bank spreads continued to tighten during the week. Officials in India anticipate 11% GDP growth in ’21-’22 from April, following vaccination, in-line with the 11.5% and 8.1% projected for India and China, respectively, by the IMF. The near-term future is in South Asian, but this may not apply to all India-headquartered banks. We also note that significant bank recapitalized in needed for these forecasts to materialize. Please see <a href="https://www.smartkarma.com/insights/yes-bank-solvency-simulation-with-covid-19-coverage-scenarios" target="_blank" data-smartkarma-citation="insights:47523" rel="noopener">YES Bank Solvency Simulation with Covid-19 Coverage Scenarios</a> for an example of the difficulties facing India-headquartered banks.Market Outlook: GameStop is noise and not a signal. Although weakening in some markets, economic growth and continued monetary accommodation remain the main drivers for credit markets. Credit fundamentals should catch-up with repressed credit spreads. Therefore, credit has limited upside in a fast reflation scenario. Reconciliation or negotiation may deliver the same stimulus result over the near term.  As such, a slower, more contained, reflation environment could be Emerging Market credit supportive.

A pack of small, but smart, investors in a free and open market caught hedge funds off guard this week. The hunter was hunted, and the resulting equity market volatility drove financial concerns more than financial conditions. The GameStop situation is noise and not a signal for risk assets. For a nasty global risk asset unwind, there needs to be a catalyst in the form of either an economic downturn or a material tightening in Fed policy. Neither is in play. Weakness in Asia High Yield this week may create opportunities.More importantly, for credit investors, short-term Libor levels hit record lows on Friday. This matters as investors that focus on high-quality short-term securities may be pushed into commercial paper or other very short-duration paper. The rate curve should bull steepening from the excess amount of cash in the market. The flood of cash could drive credit yields even lower.In this environment, U.S. CCC-rated and Asia High Yield index spreads widened.  More and more brokerage houses are recommending Asia High Yield as the place to be in 2021, despite property developer concerns in China. Our take is that fundamentals have yet to catch-up with spreads in the US CCC-rated area although we suspect that they may. However, US High Yield has a higher effective duration now, versus pre-Covid, and versus Asia High Yield. As such US High Yield credits have more limited upside in the reflation scenario. A delay in the reflation scenario should benefit Asia-headquartered risk assets.At the same time, ivory-tower syndrome has taken over the Fed. Chairman Powell’s comments this week that what is really driving asset prices is not monetary policy, suggests that the disconcerting disconnect between financial and economic conditions is not understood by senior policymakers. If the Chairman’s comments were true, then there would be no need to signal a tapering of asset purchases well in advance. Whether you call it price fixing or price guidance by the Fed and ECB policymakers, it does not matter as you cannot fight it. The Fear of Missing Out (FOMO) is real in the credit markets.Despite these challenges, Asia’s bank spreads continued to tighten during the week. Officials in India anticipate 11% GDP growth in ’21-’22 from April, following vaccination, in-line with the 11.5% and 8.1% projected for India and China, respectively, by the IMF. The near-term future is in South Asian, but this may not apply to all India-headquartered banks. We also note that significant bank recapitalized in needed for these forecasts to materialize. Please see YES Bank Solvency Simulation with Covid-19 Coverage Scenarios for an example of the difficulties facing India-headquartered banks.Market Outlook: GameStop is noise and not a signal. Although weakening in some markets, economic growth and continued monetary accommodation remain the main drivers for credit markets. Credit fundamentals should catch-up with repressed credit spreads. Therefore, credit has limited upside in a fast reflation scenario. Reconciliation or negotiation may deliver the same stimulus result over the near term.  As such, a slower, more contained, reflation environment could be Emerging Market credit supportive.

Bank Credit Weekly: GameStop Is Noise, Not a Signal, for Risk Assets

Ironically, a distracted and internally divided US Congress combined with an accommodative Fed could be bullish for risk assets and simultaneously reduce bearish fixed income pressures. For bond investors, it could be reassuring that the Goldilocks election outcome remains as political balances keep the US government from undertaking an even larger, more sustained, reflationary fiscal push. This could benefit Asia-headquartered risk assets.Some observers worry, rightly so, that the trial of former President Trump threatens to elongate the political divide in the U.S. This could make it more difficult for President Biden to effectively deliver on his fiscal spending plans in a timely manner while economic activity indicators soften. In addition, expectations that President Biden’s $1.9 trillion stimulus plan may be materially watered-down, by almost one-half, raised expectations that Fed accommodation would be extended longer than anticipated when the stimulus plan was first announced. As such, the current distraction may be credit positive. Meanwhile, U.S. CCC-rated indexes compressed into uncharted territory as CCC-index yields hit all-time lows. Asia risk asset followed, although the credit spread relationship between these two geographies remains far from the norm.  We note that credits only have limited upside in the reflation scenario.  Please see <a href="https://www.smartkarma.com/insights/bank-credit-weekly-moving-the-goal-posts" target="_blank" data-smartkarma-citation="insights:46889" rel="noopener">Bank Credit Weekly: Moving the Goal Posts</a> for more on this. A delay in the reflation scenario could also benefit Asia-headquartered risk assets.In addition, just as the US-dollar media narrative began to change from one of universal weakening to strengthening, US-dollar strengthening stopped. Declining odds on a large federal stimulus package likely arrested dollar strength. We present our US-dollar views inside and why it may be short-term Asia credit positive.Meanwhile, Fed officials are not reading from the same song sheet. Admonishing others to avoid asset purchase tapering discussions at the Fed is tantamount to a Say no Evil, Hear no Evil strategy. This is misguided as an open discussion could limit volatility once tapering begins. Please see last week’s <a href="https://www.smartkarma.com/insights/bank-credit-weekly-distractions-may-drive-markets-near-term" target="_blank" data-smartkarma-citation="insights:47117" rel="noopener">Bank Credit Weekly: Distractions May Drive Markets Near Term</a> for more on this. Fed Chairman Jerome Powell will discuss the FOMC’s decisions on Wednesday, 27 January.Against this backdrop, almost all of Asia’s bank debt tightened during the week. Improved risk sentiment, the arrest of a stronger US-dollar, EM inflows and country specific announcements drove these results. In particular, the Reserve Bank of India’s proposal to revise the regulatory framework for India’s non-bank finance companies likely had a positive impact on the US-dollar bonds of these institutions.Several Asia-headquartered banks reported earnings as the week ended and into the weekend. Asia bank earnings season is upon us. However, we note that asset quality indicators at many banks greatly underestimate the level of troubled debt within the institution as forbearance measures remain in place in several operating environments. This is driving provisioning costs lower than would be expected in a more normal operating environment. The value of these earnings reports is significantly diminished for credit investors. As such, credit value should remain driven by larger market forces.Market Outlook: The distraction of another set of impeachment proceedings could turn out to be market friendly if it results in more targeted stimulus. Outside of the Washington beltway, the real issue of how much is too much stimulus as the vaccine is rolled-out will lead to concerns on when the Fed begins to taper its asset purchases. Credit has limited upside in a fast reflation scenario. A slower, more contained, reflation environment could be Emerging Market credit supportive.

Ironically, a distracted and internally divided US Congress combined with an accommodative Fed could be bullish for risk assets and simultaneously reduce bearish fixed income pressures. For bond investors, it could be reassuring that the Goldilocks election outcome remains as political balances keep the US government from undertaking an even larger, more sustained, reflationary fiscal push. This could benefit Asia-headquartered risk assets.Some observers worry, rightly so, that the trial of former President Trump threatens to elongate the political divide in the U.S. This could make it more difficult for President Biden to effectively deliver on his fiscal spending plans in a timely manner while economic activity indicators soften. In addition, expectations that President Biden’s $1.9 trillion stimulus plan may be materially watered-down, by almost one-half, raised expectations that Fed accommodation would be extended longer than anticipated when the stimulus plan was first announced. As such, the current distraction may be credit positive. Meanwhile, U.S. CCC-rated indexes compressed into uncharted territory as CCC-index yields hit all-time lows. Asia risk asset followed, although the credit spread relationship between these two geographies remains far from the norm.  We note that credits only have limited upside in the reflation scenario.  Please see Bank Credit Weekly: Moving the Goal Posts for more on this. A delay in the reflation scenario could also benefit Asia-headquartered risk assets.In addition, just as the US-dollar media narrative began to change from one of universal weakening to strengthening, US-dollar strengthening stopped. Declining odds on a large federal stimulus package likely arrested dollar strength. We present our US-dollar views inside and why it may be short-term Asia credit positive.Meanwhile, Fed officials are not reading from the same song sheet. Admonishing others to avoid asset purchase tapering discussions at the Fed is tantamount to a Say no Evil, Hear no Evil strategy. This is misguided as an open discussion could limit volatility once tapering begins. Please see last week’s Bank Credit Weekly: Distractions May Drive Markets Near Term for more on this. Fed Chairman Jerome Powell will discuss the FOMC’s decisions on Wednesday, 27 January.Against this backdrop, almost all of Asia’s bank debt tightened during the week. Improved risk sentiment, the arrest of a stronger US-dollar, EM inflows and country specific announcements drove these results. In particular, the Reserve Bank of India’s proposal to revise the regulatory framework for India’s non-bank finance companies likely had a positive impact on the US-dollar bonds of these institutions.Several Asia-headquartered banks reported earnings as the week ended and into the weekend. Asia bank earnings season is upon us. However, we note that asset quality indicators at many banks greatly underestimate the level of troubled debt within the institution as forbearance measures remain in place in several operating environments. This is driving provisioning costs lower than would be expected in a more normal operating environment. The value of these earnings reports is significantly diminished for credit investors. As such, credit value should remain driven by larger market forces.Market Outlook: The distraction of another set of impeachment proceedings could turn out to be market friendly if it results in more targeted stimulus. Outside of the Washington beltway, the real issue of how much is too much stimulus as the vaccine is rolled-out will lead to concerns on when the Fed begins to taper its asset purchases. Credit has limited upside in a fast reflation scenario. A slower, more contained, reflation environment could be Emerging Market credit supportive.

Risk Assets Are Supported by a Distracted Congress and Accommodative Fed

Vietnam

Vietnam Prosperity Joint Stock Commercial Bank (VPBank) provides commercial banking services. The Bank offers domestic remittance services, savings account, personal loans, e-banking, trade financing, deposits, tax payment, foreign exchange, cash management, and other banking services. VPBank serves customers in Vietnam.

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Vietnam Prosperity Bank (VPB VN)

Bank Credit Weekly: One Size Does Not Fit All

Performance attributes varied amongst bank credit classes. Short duration in IG financials combined with high credit spreads in HY and more...

Hank Calenti, CFA

Bank Credit Weekly: Asia Credit Outperforms Despite Treasury Tantrum

Global bank bond prices fell by less than their benchmark notes, resulting in a bout of credit outperformance. Given the rate of change, there are...

Hank Calenti, CFA

Bank Credit Compass: Credit Tourist May Vacate if Real Fundamentals Do Not Catch-Up

Credit tourists may vacate if economic growth and real credit fundaments are not delivered. The gap between credit spreads and fundamentals is...

Hank Calenti, CFA

Bank Credit Weekly: GameStop Is Noise, Not a Signal, for Risk Assets

GME is noise, not a signal. Economic growth and monetary policy remain the drivers for credit markets. Reconciliation or negotiation equal the same...

Hank Calenti, CFA

Risk Assets Are Supported by a Distracted Congress and Accommodative Fed

Declining odds on a large US federal stimulus package likely arrested US-dollar strength. A slower, more contained, reflation environment could...

Hank Calenti, CFA

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