Income boost for the richest 20%
The Senate’s tax cut bill will cost the bottom 20% of taxpayers an average of $560 a year, while giving an average boost of $6,055 to those at the top end, economists at the Budget Lab at Yale University show
- While the poorest taxpayers bear the brunt of cuts to Medicaid and other programs, those at the top end of the income charts would get the biggest benefit of the tax cuts, including income rate cuts and an expanded state and local tax deduction
EU inflation at ECB’s 2% target
Euro-area inflation settled at the European Central Bank‘s target in June, with consumer prices rising 2% from a year ago
- A stronger euro and lower energy costs are helping keep price pressures in check, along with lackluster expansion by the region’s 20-nation economy
- The data support declarations by ECB Chief Economist Philip Laneand his colleagues that the process of wresting back control of inflation is almost complete — even if President Donald Trump’s tariffs and war in the Middle East make for a precarious outlook
- The ECB’s rate-setting Governing Council is widely expected to take a timeout on interest-rate cuts at its final policy decision before the summer break, with more clarity expected at the next meeting in September
Europe’s HY market sets new record
European junk bond issuance set a new monthly record in June with deals continuing to flow in
- Companies sold over 22.5 billion EUR in June, previous record set in June 2021 was beaten by nearly 4 billion EUR – flurry was capped by first CCC rated deal in over a year courtesy of Flora Food Group
- According to data from Bank of America there European have been 7 straight weeks of positive flows into HY with no signs of a possible let up currently showing
- Despite this increase in appetite from investors, many risks remain. Debt documentation is weighted heavily towards issuers, with dividend recapitalization and payment-in-kind amongst the most aggressive offerings that have come to market
Algebris considering reducing AT1s
Algebris Investments, one of the top holders of financial bank debt, is considering reducing allocations to AT1 (Tier 1) due to its overheated conditions and compressed spreads
- Algebris, which holds around 12 billion EUR of AT1 within its Financial Credit Fund has been skipping recent new issues – looking to replace repaid issues with safer Tier 2 and senior bonds
- AT1 market has been experiencing very high demand – spreads have compressed to record lows compelling second tier banks to issue AT1 debt
- Average spreads for European AT1 debt are currently indicated at 300bp, well below the long-term average of 440bp and slightly above the record low of 256bp set earlier this year
- Technical for the segment though remain strong with limited supply that is not enough to meet additional demand
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