Key market moves
Last week, markets were dictated by positive sentiment, as the equity market experienced their largest rally since the aftermath of the Great Depression, and US Investment Grade Credit tightened 36 basis points. The bull market was driven by the Federal Reserve’s substantial revisions to the terms of their corporate bond buying facilities, which expanded their purchasing program to HY bonds. This is in addition to the prospects of an OPEC+ oil production agreement to cut 9.7 million barrels of supply. The US Investment Grade Credit market saw $37.2 billion in issuance, bringing us to 61.9% ahead of 2019’s pace. Many are viewing this rally with a critical and cautious eye, as the looming uncertainty of earnings season, paired with negative economic data, could act as strong headwinds for short-term global asset performance.
As of April 9th, LGIMA estimates that pension funding ratios remained flat month to date, with tightening credit spreads offsetting the changes due to positive equity performance. Our calculations indicate the discount rate’s Treasury component increased by 1 basis point while the credit component tightened 27 basis points, resulting in a net decrease of 26 basis points. Overall, liabilities for the average plan have increased ~4.0% while plan assets with a traditional “60/40” asset allocation have increased ~4.1% month to date.
Source: Bloomberg Barclays, as of April 13, 2020
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