08 Apr 20: Oil Update - Running out of storage

• The oil market is about to test its storage capacity limits as a result of a collapsing global demand and a frenetic pumping activity. By the end of May, the world might already run out of storage.
• A bold agreement to cut production is necessary to relieve prices and stabilize the physical market.
• We doubt that OPEC+ and other G-20 members can credibly commit to cut 10mn b/d (using April output as...

07 Apr 20: Chart of the Week - Working remotely: How feasible?

• Amid social distancing to contain the spread of COVID-19, for many firms remote working is the only way to keep their businesses going during the lockdown, thus mitigating the impact of the unprecedented recession that is in the making. Our Chart of the Week shows the estimated share of work that can be performed from home for five major European economies. It reflects the underlying features of...

05 Apr 20: Chief Economist's Comment - Sunday Wrap

• Our guestimate of how bad it’ll get, the impact on debt – and why the fiscal authorities should do still more.
• Ironically, in the middle of all the pain, there is one group of society now benefitting from a massive windfall, namely consumers of oil. I’ll summarize why – and how – that gain ought to be redistributed to more deserving groups.

02 Apr 20: Economics Chartbook - The mother of all recessions has arrived (2Q20)

Dear reader, welcome to this new issue of our Economics Chartbook where we present updated forecasts that take into account the huge damage to growth caused by the spread of COVID-19.

• Global: Measures deemed necessary to contain the spread of COVID-19 have paralyzed the global economy. While China has now started to lift restrictions, in the rest of the world a flattening of the epidemic curve is...

31 Mar 20: Chart of the Week - HY investors are likely underestimating default rates

• The increasing likelihood that widespread corporate defaults will occur in the coming months has resulted in significant repricing in European HY debt markets. Credit spreads in the iBoxx HY NFI have reached about 720bp, and credit risk premiums have increased at their fastest pace ever (see red line in chart). In the meantime, however, spreads have rebounded to about 640bp, which implies a HY...

29 Mar 20: Chief Economist's Comment - Sunday Wrap

• The first “coronavirus economic data” and what they tell about the outlook.
• Why Trump and others are wrong to suggest there is a trade-off between the health aspect and the economic aspect of all this.
• The big European debate about solidarity: The national vs. common response.
• The central banks keep coming… and the emergence of the new approach to policy coordination between fiscal and monetary.

22 Mar 20: Chief Economist´s Comment - Sunday Wrap

• Unprecedented policy actions are now being rolled out. In general, markets liked it, but it’s too early to declare victory.
• More likely, we’ll have to wait for a flattening of the epidemic curves, and then some more time before restrictions will be eased. And even then, the strength of markets will depend on the likely trajectory of GDP. I’ll summarize the alphabet of possible trajectories: The...

18 Mar 20: Oil Update - Saudi Arabia and Russia: Who will blink first?

• With the global oil demand deteriorating by the day, only a resolution of the price war between Russia and Saudi Arabia can bring some price relief to the market.
• Since Brent prices below USD 40/bbl do not mean equilibrium for anyone, sooner or later, one of the two or both will have to back down, turn the tap off and push for some collective agreement – something that should happen well-before the...

15 Mar 20: Chief Economist´s Comment - Sunday Wrap

• The spreading of the virus: Still some tough weeks ahead in Europe and the US, but there is light at the end of the tunnel.* The policy responses, which I divide into two sections: First we have seen a dramatic increase in recent days in measures to contain the spreading of the virus (and to remind you, while tough measures are bad for short-term growth, they are good for the prospects of getting...

08 Mar 20: Chief Economist´s Comment - Sunday Wrap

• The Fed´s rate cut on Tuesday, which seemed a bit panicky to me. It´ll have little effect on the real economy and it illustrates that there is no central bank policy coordination in the pipeline. This means additional volatility, particularly in the FX markets.* How the ECB is likely to respond on Thursday, namely with a package of liquidity measures and they´ll ? hopefully ? provide comfort...

01 Mar 20: Chief Economist´s Comment - Sunday Wrap

• I´ll first recap what we learned this past week with respect to the spreading of the virus, and ? short of any important data releases - the indications from businesses, rating agencies and policymakers.* I´ll then discuss three scenarios for the further spreading of the virus and the likely implications for growth, markets and policies.

23 Feb 20: Chief Economist´s Comment - Sunday Wrap

• I´ll recap the evidence we have from these past few days of this major supply shock beginning to roam the global economy.* I´ll discuss why there is no effective policy response to such supply shocks, and I´ll discuss what it´s likely to mean for global Q1 GDP.* I´ll contrast what ought to be the market response to supply shocks with what markets have shown so far.

03 Mar 20: Rates Perspectives - 10/30Y BTP spread: A steepener trade looks better than a flattener

• The 10/30 BTP spread has flattened sizably since the beginning of February and currently trades at 95/96bp (on Bloomberg fair value, 103/104bp taking BTP Aug29 and Sep49), the lowest level since August 2019. * We present a fair value model for the 10/30Y BTP spread based on the BTP ?idiosyncratic? premium (as a proxy for the BTP credit spread), the level of rates and supply pressure at the...

13 Feb 20: Rates Perspectives - Governments go green: Facts, figures and upcoming deals

• Investor interest in green bonds is increasing. Healthy demand is mirrored in supply: in 2019, the issuance volume of EUR-denominated green bonds amounted to around EUR 90bn, bringing the outstanding to around EUR 255bn.
• Euro-area sovereigns have started to issue green bonds in recent years but the market is still in its early stages, with four bonds trading and a total size of around EUR 40bn. The...

21 Nov 19: UniCredit Macro & Markets - 2020-21 Outlook: Late-cycle blues

• Macro: Global growth is set to weaken further to 2.7% in 2020, as the US economy is likely to enter a downturn, protectionist tensions are unlikely to fade materially and the resilience of the domestic drivers of eurozone growth starts to wane. The Fed will probably cut rates by 100bp, while the ECB is expected to stand pat and focus on its policy review. Economic growth in the CEE region will...

25 Sep 19: The UniCredit Economics Chartbook - Global slowdown under way – and still downside risk (4Q19)

• Dear Reader, welcome to the latest issue of our Economics Chartbook, in which we are fine-tuning some of our growth forecasts to take into account a weaker global economy. Major central banks have been supportive, especially the ECB, but this can only mitigate the downside risks.
• Global: We are revising slightly downward our global GDP growth forecast for this year by 0.1pp to 3.0% while...

14 Feb 20: Shortened version of the Euro Credit Pilot (February 2020)

This is a shortened version of the Euro Credit Pilot, which we deem to be an acceptable minor non-monetary benefit under MiFID II.

• Introduction: The outbreak of the coronavirus has already led to the disruption of global supply chains, with numerous producers across sectors reporting production halts at facilities in China. The related uncertainties warrant defensive positioning in European credit.

• ...

10 Dec 19: Shortened version of the Euro Credit Pilot (December 2019)

This is a shortened version of the Euro Credit Pilot, which we deem to be an acceptable minor non-monetary benefit under MiFID II.

The late stage of the credit cycle will likely be prolonged by the extraordinary ECB policy measures. Performance in European credit is being pulled in one direction by cyclical headwinds (projected in our below-consensus growth forecast and a mild recession in the US),...

16 Oct 18: Shortened version of the Euro Credit Pilot (October 2018)

This is a shortened version of the Euro Credit Pilot, which we deem to be an acceptable minor non-monetary benefit under MiFID II.

• Corporate credit spread performance has shown some interesting divergence between synthetics and cash bonds. In synthetics, credit risk premiums have drifted wider over the last two weeks. The iTraxx Main traded at around 68bp from the time of the roll into the new...

04 Feb 20: CEE Quarterly - CEE: Ein Outperformer in herausfordernden Zeiten (1Q20)

Übersetzung der englischen Originalversion vom 13. Januar 2020

• Das Jahr 2020 könnte sich aufgrund des schwachen Welthandels, einer wahrscheinlichen Verlangsamung in den USA, der verschärften finanziellen Bedingungen in den Schwellenländern und der Auswirkungen, die diese Faktoren auf die Politik und die makroökonomischen Ungleichgewichte haben könnten, als ein schwieriges Jahr für die...