My latest Investment Grade Fixed Interest Fund (CHIG) market commentary, published last week, mainly outlines Central Bank measures and my conclusion that they were stepping up to the plate very quickly and effectively to prevent systemic risk and to unfreeze and support credit and money markets. This appears to be working and, along with the Fed implementing ‘QE infinity’ and open ended commitment from all major Central Banks, we have at the moment a functioning system and in particular credit markets.

The iTraxx main IG index peaked at around 140 having come from 40ish in mid-February and is now at around 94. The polarity in credit as an asset class means that indiscriminate hitting of bids turned into a ‘liftathon’, so even when we see a rally in spreads, finding inventory is not always easy (and no one is likely to go short off their book). CHIG, as mentioned before, had good levels of liquidity in cash and short Gilts and has selectively deployed some of this into beaten up credits, but in a measured way, as we do not think the volatility is over (although hopefully the extreme, ‘dysfunctional’ volatility might just be behind us) and have no more idea what the timescale of this whole episode will turn out to be than anyone else.

The encouraging and important thing to me is that credit markets are functioning (and this despite the fact that >90% of market participants are working remotely, mainly from home). Last week was the biggest week for issuance ever, so the primary market is certainly open for business. Most has been in USD and then EUR, but some in GBP. We saw a new 9-year issue from Diageo, the kind of name we want to buy at this moment in time, and we got some from a well oversubscribed book. They came at Gilts +255bp and are now trading at G+240ish so performing well. We are in the book today for another new issue from Experian, a 12-year at Gilts +300. It will price at G+280 and a deal size of £400 million has attracted an order book of >£1.7 billion. We have been active in the secondary market too, picking up issues from the likes of HSBC, Moller Maersk, Euroclear, British Telecom – you can see the theme in the quality of names and they have all been at significant discounts. We also added to some HICL when it was trading almost at its lows. So you can see we have been adding where we see value, but also hopefully wisely.