The Ibex-35 yields a slight 0.12% but holds 9,000 points
Maximum prudence on the European stock markets, with investors waiting from the sidelines for the first meeting of the year of the European Central Bank (ECB) which, according to the consensus of analysts, will announce a new rise in interest rates of 50 basis points this Thursday.
Although the market has discounted this possibility for a long time, the publication yesterday of the advance data for the CPI in Spain –which reached 5.8% in January, above expectations– unleashed expectations that the ECB would be much more aggressive in its upcoming meetings. Not so much in the rise in reference rates, but in his speech.
Against this backdrop, the Ibex-35 ended the first session of the week with a fall of 0.12%, maintaining at least 9,000 points (it closed at 9,049.3 points). Merlin, with an increase of 1.34%, led the upper part of the table, while Banco Santander rose 0.74%; Telephone 0.66%; Logista, 0.57%; and Inditex, 0.56%.
On the contrary, Fluidra has led the decreases, of 2.68%, ahead of Grifols (-2.63%), Acciona (-2.12%), Solaria (-1.98%) and Rovi (- 1.76%).
Fixed income reaction
However, the first market reaction to the Spanish CPI data was observed in fixed income, with the yield of sovereign bonds soaring as soon as the data was released. Specifically, interest on the Spanish 10-year bond rose more than 10 basis points to 3.3%.
This environment of interest rate hikes by central banks has left a more than optimistic scenario for fixed income managers, who aspire this year to compensate the most conservative investors, who last year suffered notable losses in their wallets.
Just yesterday, the Buy & Hold fund manager joined these voices that point out that such an opportunity has not been seen in the bond market for a long time. Rafael Valera, CEO and manager of the firm, recalls that “the change in discourse of the central banks came with the portfolio of our funds fully invested and we continue to do so.”
Valera, with more than 30 years of experience in this market, indicates that “I had never seen such a number of issuers of good credit quality offering returns close to double digits on their bonds.” For this reason, according to the firm’s Semi-Annual Letter, they have taken the opportunity to “gradually gain weight in investment-grade bonds.”
Currently, the return to maturity of the manager’s fixed income portfolio is 9.5%, with an average duration of 3 and 40% of it in investment grade issues. With positions in a total of 53 issuers, the debt weight of banks such as Cajamar and Ibercaja, old acquaintances of Buy & Hold, has been strengthened, as well as bonds in the leisure and tourism sector.
Looking ahead to the ECB meeting next Thursday, analysts at Federated Hermes Limited indicate that “the ECB’s path is determined and rates will continue to rise in the coming months.”
A 50 basis point rate hike is expected at its meeting next week, and it is unlikely to be the last, unless the updated forecasts for March offer a radically different outlook for inflation and growth than in December.«
Ultimately, they believe that data developments will determine the duration and extent of ECB tightening. “As central banks are slow to move and the data provides a hindsight picture of the economic situation, there is a risk that the ECB could end up tightening too much,” they say.
Meanwhile, in the raw materials market, a barrel of Brent fell 1.5% to 85.37 dollars, while the US West Texas is around 78.42 dollars.