ECB’s Focus Shifting to Bank Lending

The ECB has repeatedly stressed the primacy of its PEPP asset-purchase program in tackling the economic impacts of Covid, despite the importance of the bank-lending channel for the European economy, given the high degree f financial intermediation. The decision taken...

Nosebleed Valuations Persist in US High Yield

In August, we had reviewed a few charts showing that US high yield valuations were divorced from fundamentals, as well as to other yield products. This week, refreshing those charts, we can see that things are just as bad. US high yield seems to be the most vulnerable...

No Turnaround in Sight for C&I Lending

We are seeing multiple signs of a slowdown in lending in the US, as discussed in our recent thematic US Banks Stocks: Exposed to the End of the Credit Cycle. The top chart shows a coincident relationship between sales-to-inventory ratios and C&I lending. As...

Reflation in Danger Due to Low Liquidity

Over the past few weeks we have expressed scepticism on the Trump reflation trade and we have argued that bank stocks should underperform. We have shown previously that when you look at the 3 and 6 month change in Commercial & Industrial lending as well as the...

Financials Rally at Odds with Credit Cycle

Financials have been the biggest winners since the Trump election  The S&P Bank ETF KBE has rallied 29% since the election.  We’ve written about financials over the past few weeks, but it is worth highlighting again. While we may see financials rally in the short...

Commercial and Industrial Lending to Fall

You can take a horse to water, but you can’t make it drink.  This is generally the mistake made by many when it comes to credit.  If you expand the availability of credit, and make it more attractive, then more people will want credit.  But this is rarely the case. ...