- "The summer holiday season is upon us and many investors will recover from peripheryrelated stress on periphery beaches. Chances are good that during this summer investors can safely enjoy some relaxing days without being concerned about short-term risks too much. Major sources of potential headline risks – the stress test and the 2Q10 earnings season – are already behind us (or will end soon). While macroeconomic risk factors are on the horizon, we do not see catalysts in the short term that could trigger a change in the current more positive market perception. Nevertheless, many investors might still have the "summer lull 2008" in mind, which brought a major catalyst for a downturn – the Lehman default. Hence, we provide our priority list of "things that shouldn't happen in order not to spoil your summer holidays"."
- Macro Outlook: "While the bank stress test results led to some relief in the valuation of eurozone financials' risk, latest macroeconomic data suggest a deceleration of economic activity in the major economies may lead to more soberness in credit markets."
- Micro Fundamentals: "The European earnings season – consistent with the one in the US – currently fuels the positive momentum in equity markets as well as in credit spreads."
- Debt-Equity-Linkage: "Stock markets performed well during July, posting their strongest gains in a single month since July 2009. Credit markets rallied even stronger, to the tightest levels since May 2010. Hence it is worthwhile assessing where we stand in terms of valuations."
- Credit Quality Trend: "As authorities implement new rules for credit rating agencies (CRA) we assess their new role in light of changed regulation."
- Market Technicals: "Primary markets are already in summer lull mode."
- Valuation & Timing: "The end of the banking crisis. Sounds pathetic, but it isn't. While pressure from the slowdown will persist, what will be different is the role of the banks: Instead of being the major culprit during a crisis, they will rather become a victim during a crisis."
- Other Credit Markets: "Credit derivatives at the crossroads – an update on central clearing of CDS. Securitization: News on the new ECB haircuts for repo-collateral posted by banks in order to obtain liquidity. EEMEA Credits: Chinese banks back in the limelight."
- Allocation: "We upgrade the financials sector to MW from UW, while non-financials remain UW. Within the financials sector, we put bank and insurance senior on UW (from OW), LT2 on MW (from OW), and all other sub categories on OW (from UW), as we think that subs will outperform seniors."
- Model Portfolio: "Our financials portfolio outperformed the benchmark by 100bp, while the non-financials portfolio outperformed by 9bp."
- Macro Outlook: "While the bank stress test results led to some relief in the valuation of eurozone financials' risk, latest macroeconomic data suggest a deceleration of economic activity in the major economies may lead to more soberness in credit markets."
- Micro Fundamentals: "The European earnings season – consistent with the one in the US – currently fuels the positive momentum in equity markets as well as in credit spreads."
- Debt-Equity-Linkage: "Stock markets performed well during July, posting their strongest gains in a single month since July 2009. Credit markets rallied even stronger, to the tightest levels since May 2010. Hence it is worthwhile assessing where we stand in terms of valuations."
- Credit Quality Trend: "As authorities implement new rules for credit rating agencies (CRA) we assess their new role in light of changed regulation."
- Market Technicals: "Primary markets are already in summer lull mode."
- Valuation & Timing: "The end of the banking crisis. Sounds pathetic, but it isn't. While pressure from the slowdown will persist, what will be different is the role of the banks: Instead of being the major culprit during a crisis, they will rather become a victim during a crisis."
- Other Credit Markets: "Credit derivatives at the crossroads – an update on central clearing of CDS. Securitization: News on the new ECB haircuts for repo-collateral posted by banks in order to obtain liquidity. EEMEA Credits: Chinese banks back in the limelight."
- Allocation: "We upgrade the financials sector to MW from UW, while non-financials remain UW. Within the financials sector, we put bank and insurance senior on UW (from OW), LT2 on MW (from OW), and all other sub categories on OW (from UW), as we think that subs will outperform seniors."
- Model Portfolio: "Our financials portfolio outperformed the benchmark by 100bp, while the non-financials portfolio outperformed by 9bp."
Unicredit Euro Credit Pilot Aug2010
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