Look Out for a Positive Re-Rating in Europe as Germany Unveils a Host of Pro-Growth Fiscal Measures

CCC-BB rated spreads widen out to over +800 basis points for the first time in 15 months — consider this a canary in the coal mine for the risk-on trade

Key Takeaways

• Soft Data Versus Stubborn Expectations: The soft June jobs report cut the odds of an interest-rate increase by the Fed to 17% for the July 29th FOMC meeting, down from 29% on Wednesday. Those chances should be closer to zero. And, rather astoundingly, markets still see roughly 78% odds of a rate hike later this year, barely moving from 83% on Wednesday. Bizarre. Oil prices have done a complete retreat, the Atlanta Fed is down to +1.2% real GDP growth for Q2, and the job market has no pulse. Great environment for a policy tightening.